Indonesia’s mutual fund industry, despite achieving a milestone of managing assets worth over Rp500 trillion by the end of 2023, experienced a slight decline year-on-year. The Otoritas Jasa Keuangan (OJK) outlines seven strategies to rejuvenate the sector in 2024, addressing both domestic and global economic dynamics.
The Indonesian mutual fund industry witnessed a mix of growth and challenges in 2023. The year ended with a total asset under management (AUM) of Rp504.9 trillion, marking a monthly increase but a slight annual decrease from Rp508.2 trillion in 2022. The OJK has analyzed the situation and proposed a multi-faceted strategy for 2024 to address these challenges and promote growth.
The OJK’s analysis attributed the mutual fund industry’s pressure to the performance of underlying assets, high interest rates since 2022, and the absence of certain tax incentives (Government Regulation No. 91 of 2021). A cautious investor sentiment further compounded these challenges.
Globally, economic slowdowns, particularly in China, are expected to impact the market. The World Bank and OECD project global economic growth at 2.4%-2.7%, with Indonesia’s economy anticipated to grow steadily at 5% in 2024. The upcoming elections are also expected to introduce volatility in the stock market.
For 2024, the OJK plans to enhance the mutual fund product range, including exploring new underlying investment instruments. Efforts will be made to expand the investor base for mutual funds, both institutional and retail.
Harmonization of regulations across banking and non-banking financial sectors is on the agenda to improve investment opportunities in mutual funds. The possibility of establishing Pension Fund Management Companies (DPLK) by investment managers is being considered.
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Implementation of new regulations supporting fund-on-fund arrangements for mutual funds, ranking and rating systems for mutual funds and investment managers, and industry restructuring to boost efficiency are key focuses.
These strategies signify Indonesia’s commitment to enhancing its mutual fund industry’s attractiveness and stability. The OJK’s proactive approach may present new investment opportunities in a more diversified and robust Indonesian market.
Indonesia’s mutual fund industry faced challenges in 2023, leading to a slight decrease in asset under management. The OJK has developed a seven-step strategy for 2024, focusing on product development, regulatory harmonization, and industry efficiency. This comprehensive approach aims to revitalize the sector, offering promising prospects for domestic and international investors.
Source: Bareska (2024)
