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Indonesia regulator may create rules for multi-class funds, report says

By Asia Asset Management  
Oct 31, 2019

Indonesia’s Financial Services Authority may draw up specific rules for multi-class mutual funds if needed, according to a local English language daily.

Unlike other Asian and Western countries, including Australia, Canada, Hong Kong, India, Singapore and the US, there are no specific regulations for these funds in Indonesia, the Jakarta Globe says in a report on October 25, quoting Sujanto, investment management director at the financial services regulator, known locally by its Indonesian acronym OJK.

"A multi-class fund structure provides investors with more options and increases the efficiency of investment managers...We [OJK] are willing to regulate the [multi-class fund] sector should the need arise in the future," says Mr. Sujanto, who like many Indonesians goes by one name.

A multi-class fund allows investors to invest in shares grouped into classes, typically from A to C. Although each class invests in the identical pool of securities with the same investment strategies and objectives, the fees and minimum investments amounts are different, which will affect returns.

A class A fund typically requires higher minimum investments but charges lower fees, while it’s the reverse for a class C fund.

Fund management companies in Indonesia are allowed to launch these funds because they fall under OJK’s regulations for collective investment contracts. It’s unclear how many multi-class funds there are in the country.

The Manulife Obligasi Unggulan Fund, which was introduced in 2003, was one of the earliest, according to the Jakarta Globe.

Spokespersons for OJK did not immediately respond to questions from Asia Asset Management (AAM).

Dedicated rules to govern multi-class funds can help drive Indonesia’s asset management industry, according to a fund manager at a foreign asset management firm in the country.

"Besides potential cost savings for investors, it also reduces fund management companies' cost, especially in the area of administration,” the Jakarta-based fund manager tells AAM, speaking on condition of anonymity.

“However, the [multi-class fund] regulations would need to be accompanied by government's continuous efforts to further liberalise the asset management industry – especially in the area of cross-border mutual fund offerings," he adds.

The Indonesian mutual fund industry had 540.91 trillion rupiah (US$38.98 billion) of assets as of end-September 2019.