The Indonesian Investment Manager Association (AMII) and Indonesian Custodian Bank Association (ABKI) have encouraged industry players during a seminar in Jakarta on Wednesday to introduce more mutual funds with multiple share classes to reduce costs for both mutual fund investors and fund managers. (JG Photo/Diana Mariska)

Industry Associations Call for More Multi-Class Mutual Funds


OCTOBER 23, 2019

Jakarta. The Indonesian Investment Manager Association, or AMII, and Indonesian Custodian Bank Association, or ABKI, have encouraged industry players to introduce more mutual funds with multiple share classes to reduce costs for both mutual fund investors and fund managers.

Multi-class mutual funds, unlike conventional funds, offer several types of shares or classes to investors. Each class differs only in administrative features, such as fees, distribution patterns of investment returns, or currencies, but all have the same investment policies and strategies. Portfolio composition and effects in all classes are also the same. 

"For investment managers, a multi-class fund is very beneficial with regards to time and cost efficiency. In terms of cost, several components can be reduced, such as for administration. They only need to administrate one fund, instead of several, with a similar strategy," Heryadi Indrakusuma, business development chief and advisory officer at Manulife Aset Manajemen Indonesia, said at a seminar presented by the two associations in Jakarta on Wednesday. 

"As for mutual fund investors, the benefit is the potential to get more optimized returns. This is because fund management of one big portfolio is more efficient than several smaller portfolios," Heryadi said. 

Manulife Obligasi Unggulan is one of the earliest multi-class funds in Indonesia, introduced by Manulife in 2003 and administrated by Standard Chartered Indonesia as the custodian bank. The fund now has Rp 1.5 trillion ($107 million) in assets under management, six times more than the average mutual fund in Indonesia.

According to Financial Services Authority (OJK) data, the country's mutual fund industry had Rp 548.5 trillion under management in October – more than double the amount five years ago. The number of mutual funds has also increased to 2,190, from 865 at the end of 2014. 

ABKI chairwoman Roosmayani S. Effendi said she would like to see more multi-class funds in Indonesia. 

"This multi-class fund is expected to provide more alternative investment products in Indonesia, which will eventually help to develop mutual funds [in general]," she said.

The OJK does not currently have specific regulations on multi-class funds, but it is willing to regulate the sector, should the need arise in future. 

"Multi-class share [structures] have been implemented in several countries, including the United States, Canada, Hong Kong, India, Australia and the European Union. A multi-class share structure provides investors with more options and increases the efficiency of investment managers," Sujanto, investment management director at the OJK, said in his keynote address.