A corruption and money laundering case implicating state-owned PT Asuransi Jiwasraya will not severely hit Indonesia’s mutual fund industry despite the Attorney General’s Office (AGO) having named 13 asset management companies and a high-ranking official as suspects, an association and expert have said.
The AGO on Thursday accused the 13 companies of mismanaging or laundering the premium revenue collected by Jiwasraya from 2014 to 2018. They allegedly caused Rp 12.35 trillion (US$873.06 million) of state losses, or 73.46 percent of the total Rp 16.81 trillion in state losses as audited by the Supreme Audit Agency (BPK).
Mutual fund data research firm Infovesta Utama investment research head Wawan Hendrayana said on Friday most of the implicated asset management companies issued a single investor mutual fund designed specifically for Jiwasraya.
Unlike typical mutual funds, a single investor mutual fund is only owned by one customer and is often used by institutional investors, such as insurers or pension funds, that have a specific strategy and certain needs in managing their fund.
“This product is managed separately from other products sold to the public. Should there be any orders to suspend or liquidate the product, the orders will only apply to that specific product,” Wawan told The Jakarta Post.
He added that the case would not significantly hit the mutual fund industry, as the 13 investment managers only account for 10 percent of the total assets under management (AUM) of the country’s mutual fund industry, which reached a total of Rp 466 trillion as of May.
The AGO has blocked mutual fund accounts related to Jiwasraya at the 13 companies and assured on Sunday that other accounts unrelated to the case were not frozen so that the investment managers could still run their business, kontan.co.id reported.
Jiwasraya is accused of mismanagement when it invested most of its premium revenue from the JS Saving Plan, one of the company’s insurance products, in pumped-and-dumped stocks. As a result, it failed to pay out Rp 16 trillion (US$1.1 billion) in matured policies due in February to its policyholders.
In January, the AGO also named three former Jiwasraya executives and three businessmen suspects. The suspects are now defendants, having undergone their first hearing on June 4.
It also named on Thursday a Financial Services Authority (OJK) official, identified only as FH, as a suspect in the case. He was suspected of abuse of power, which allegedly paved the way for Jiwasraya’s investment mismanagement during FH’s tenure as OJK department head of capital market monitoring from 2014 to 2017.
The Indonesian Association of Mutual Funds Managers (APRDI) assured that the case would not affect the industry as every mutual fund was managed separately.
“So, a problem with one mutual fund product will not affect other products managed by the same investment manager,” the industry group said in a statement on Friday, stressing that mutual fund assets were stored and administered by independent custodian banks.
The APRDI also called on industry players to follow the prevailing regulations on managing and marketing mutual fund products, while upholding integrity, professionalism and the code of ethics.
The OJK on Thursday assured that the involvement of 13 investment managers in the ailing state-owned insurer PT Asuransi Jiwasraya case would not affect the companies’ operations, and they continued to run their business as usual.
Two of the 13 suspects, MNC Asset Management (MNC AM) and Sinarmas Asset Management (Sinarmas AM), issued statements on Thursday, saying that they both managed single investor mutual fund products owned solely by Jiwasraya.
MNC AM said in the statement that the portfolio in the mutual fund, Reksa Dana Syariah Ekuitas II, was determined by Jiwasraya and every portfolio transaction was done according to the insurer’s instruction.
Meanwhile, Sinarmas AM claimed that the Simas Saham Ultima product owned by Jiwasraya accounted for only 0.2 percent of the company’s AUM of Rp 30.2 trillion. It also insisted that the product did not affect the company and other customers due to the insignificant value.
“Sinarmas Asset Management will continue to serve our customers and prioritize the rights and interest of every customer,” Sinarmas AM lawyer Hotman Paris said in a statement. “The company is fully responsible for every product marketed. Customers shouldn’t be concerned and they can continue to sell and buy [mutual fund products] as usual.”
Wawan, however, warned that despite the low impact, the case could hurt the country’s mutual fund industry as investors could lose their trust in investment managers.
“We might see a wave of redemption, especially on mutual fund products issued by the 13 companies,” he said.
One of the suspects, PT Pool Advista Aset Manajemen (PAAM), saw an increase in redemption since the company was still named a witness in the case and it expected to see more redemption during the trial process, according to information disclosure filed with the Indonesia Stock Exchange (IDX) by its parent company, publicly listed PT Pool Advista.
Currently, the asset management company is still operational but only to manage the mutual fund related to the Jiwasraya case. It is not selling new mutual fund products to new investors, Pool Advista said.