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Multi-Asset Investment Fund in the Form of Collective Investment Contract

In order to support infrastructure development and maximize the role of capital market as a source of long term financing, the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) regulated OJK Regulation No. 4/POJK.04/2017 (“POJK 4/2017”) regarding Multi-Asset Investment Fund in the form of Collective Investment Contract. The regulation focuses on the collection of funds from specific Financiers to be invested in investment portfolios other than securities by investment managers.

Multi-Asset Investment Fund is an investment vehicle which consists of a diverse mix of asset classes and styles in one investment portfolio. Law Number 8 of 1995 regarding the Capital Market (“Capital Market Law∫”), recognizes two types of Multi-Asset Investment Funds, in the form of corporation or in the form of collective investment contract (“CIC”). This approach increases the probability of meeting Financiers’ investment goals. In the case of CIC, Investment Managers are tasked with ensuring that the portfolio represents the best available risk and return trade-offs based on assessment of return sources and current market dynamics. This investment vehicle can provide diversifying factors within a precise asset allocation, which garners specific outcome based on the Financier’s objectives.

The Participation Unit for Multi-Asset Investment Fund may be traded in the Indonesian Stock Exchange, however it may not be introduced through public offering, because it is intended for prospective investors with high net worth surpassing the capacity of the conventional capital market. The Multi-Asset Investment Fund aims to provide professional investment portfolio management services for large sum investments. POJK 4/2017 regulates management guidelines, Collective Investment Contract, disclosure documentation, valuation of security portfolio or other investment portfolio, registration, reporting by Custodian Bank, and dissolution of the Multi-Asset Financial Fund.

Investment Managers, who manages security portfolios or collective investment portfolios, may sell Participation Units through Mutual Fund Agents, who shall make offers to prospective Financiers in the forms of direct meeting, letter, or electronic media. Such activity must be based on an agreement between the Investment Manager and Mutual Fund Agents.

The Capital Market Law describes that Investment Fund may be open-ended or close-ended. An open-ended Investment Fund may sell and repurchase shares from investors up to the amount of its authorized capital. Whereas a close-ended Investment Fund may not repurchase shares from its shareholders. A close-ended Investment Fund is only applicable to Multi-Asset Investment Fund in the form or corporation, which means all Multi-Asset Investment Fund in the form of CIC is open-ended.

The Net Asset Value is set to open at Rp 1.000,00 (one thousand Rupiah) and US$ 1.00 (one United States of America Dollar) or EUR 1 (one Euro) if assigned in foreign currency. The initial value of the fund shall at least be Rp 50.000.000.000,00 (fifty billion Rupiah). The equivalent of such value shall apply also to foreign currency in accordance to Bank Indonesia middle rate published at the time of the transaction.  The initial investment deposit may include security portfolio and/or other investment portfolio valuing at Rp 50.000.000.000,00 (fifty billion Rupiah). For such purpose, the security portfolio shall be valued based on market value calculated in accordance to methods referencing legislations in the field of Capital Market, whereas other investment portfolio shall be valued based on market value by independent appraiser appointed by the Investment Manager.

Article 7 of POJK 4/2017 set out several requirements for Investment Managers, particularly to have in employment at least 1 (one) person certified as a Chartered Financial Analyst (“CFA”) and to have an investment committee tasked with establishing Multi-Asset Investment Fund policies and strategies as well as to oversee the whole investment up to the divestment or termination of the Collective Investment Contract.

Investment portfolio in a Multi-Asset Investment Fund may be in the form of securities published and offered or not through public offering, listed or traded in the stock exchange, and/or securities not listed or traded in the stock exchange, money market instruments, deposits, derivative instruments, other financial instruments approved by OJK, property or real estate, infrastructure assets, warehouse receipts, and other investment infrastructures valid according to prevailing laws and regulations. In such instances, Investment Managers are obligated to come up with risk diversification strategy and liquidation management for security portfolio and/or other investment portfolio which are assets in a Multi-Asset Investment Fund.

In managing the Multi-Asset Investment Fund, Investment Managers must not (1) publish debt securities, (2) make assignment in investment instruments in money market and/or in investment outside of the money market outside the territory of the Republic of Indonesia as defined in Law Number 11 of 2016 regarding Tax Amnesty and its implementing regulations, and (3) invest in other Multi-Asset Investment Funds.

Investment Managers shall not be affiliated to the Custodian Bank unless in circumstances where the affiliation is due to direct investment by the Government of the Republic of Indonesia. In relation to the Collective Investment Fund, the Custodian Bank is tasked with separating Multi-Asset Investment Fund assets with assets of the Investment Manager, book keeping and preparing reports in relation to the Multi-Asset Investment Fund which shall be submitted to OJK.

All Collective Investment Contracts must be notarized and registered to OJK no later than 10 (ten) days after the date of signing. Termination of such contract save by order from OJK must be notified to OJK no later than 5 (five) days after the signing of the termination agreement between the Investment Manager and Custodian Bank.

The investment scheme used for the distribution of funds to infrastructure projects utilizes the existing capital market scheme.  Multi-Asset Investment Fund is a way to provide the liquidity required in supporting non-APBN (Indonesian State Budget) infrastructure funding. It is expected to encourage stunted fiscal growth and help fulfill the market’s need for a one-stop solution product.

The publication of POJK 4/2017 is one of the government’s efforts to increase the role of domestic capital market as a long-term financing source, especially for the nation’s growing infrastructure development. It is also a way to encourage healthy competition in Indonesia’s investment management industry while overcoming financial deadlocks and challenging Public-Private Partnership programs.


Author:       

Felicia Tania
Associatef.tania@legisperitus.co.id


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