Singapore’s UOB Asset Management Ltd (UOBAM) has completed acquiring a 75% stake in Indonesia’s PT PG Asset Management (PGAM) for S$2.25 million (US$1.62 million), almost ten months after announcing the deal, and says it sees “immense potential” within the fund management industry of its neighbouring Southeast Asian nation.
UOBAM will offer its investment expertise across various asset classes, as well as in areas such as Islamic investments, smart beta and multi-asset strategies, to investors in Indonesia, the company says in a statement on September 4.
"UOBAM also aims to establish its new subsidiary as a centre of excellence that provides in-depth insights into the local market and specialised solutions in Indonesia-focused funds and investment mandates for investors across its network," it adds.
Group Chief Executive Officer Thio Boon Kiat says UOBAM sees "immense potential in Indonesia's asset management industry", driven by the country’s "economic development, increasing affluence and rising demand from individuals and institutions for investment solutions to protect and to grow their assets".
"This acquisition in Indonesia also gives us the opportunity to participate in the growth of Southeast Asia's largest economy, which will in turn drive our business growth," Mr. Thio says in the statement.
According to a fund manager at an Indonesian fund management firm, UOBAM’s entry isn’t expected to significantly change the asset management landscape in the country.
"The overall pie is still growing and there are still plenty of growth opportunities, so having a new player coming would not really change the market dynamics," the Jakarta-based fund manager tells Asia Asset Management, speaking on condition of anonymity.
"However, it is always good to have a new foreign player entering the market. It helps boost the overall industry, especially in the areas of investor education and awareness,” he says.
There are a number of foreign companies in Indonesia’s mutual fund industry, some of which have been operating in the country for decades.
The largest, Schroders Investment Management Indonesia, started in 1991 and had 46.03 trillion rupiah ($3.25 billion) of mutual fund assets at the end of 2018, according to data published on the website of the Financial Services Authority of Indonesia (OJK).
PGAM is tiny by contrast, with just 4.36 billion rupiah of mutual fund assets as of end-July 2019, according to OJK’s figures.
UOBAM, which unveiled the plan to acquire the stake in the Indonesian asset management firm late last November, had S$33.9 billion of assets under management as at June 30, 2019.
Other foreign fund managers in Indonesia include Aberdeen Standard Investments, Ashmore Asset Management Indonesia, BNP Paribas Investment Partners, Eastspring Investments, First State Investments, Manulife Asset Management Indonesia, Principal Asset Management, RHB Asset Management, and Yuanta Asset Management.
In spite of the growth potential, the fund manager says there are challenges competing in the Indonesian industry.
"Some foreign managers may struggle to grow in the country as they are reliant on other distribution networks, mainly local banks, to market their funds. Hence, I would not be surprised if there are further mergers and acquisitions activities in this space over the near term," he says.
Indonesia's mutual fund industry had 507.09 trillion rupiah of total assets at the end of 2018.