Indonesia fund management companies are readying to market Islamic/shariah-based mutual funds that will invest in offshore instruments.
This follows Indonesia’s regulation, announced late last year, that allows shariah mutual funds to use at least 51 per cent of their investment components in offshore instruments such as bonds and stocks.
The move is seen to allow investors an option to diversify their investments and deepen the country’s shariah mutual funds market.
In addition to this, the government also allowed these funds to invest up to 100 per cent of their shariah mutual funds units in overseas bonds.
With the change in regulations, a host of fund management firms have announced their plans to launch products that will invest in offshore instruments.
Others such as Bahana TCW Investment Management, a joint venture between state-run PT Bahana Pembinaan Usaha Indonesia and the Los Angeles-based Trust Company of the West (TCW) and PT Eastspring Investments Indonesia, part of UK-based Prudential Plc, are expected to follow suit.
Last year, fund management firm Aberdeen Asset Management has announced its plan to sell the first Islamic mutual funds with offshore assets.
“The potential is great because so far domestic investors can only invest in Indonesia. We are also considering to issue Islamic mutual funds in US dollar denomination in the first quarter of 2016,” president director and CEO of Aberdeen Sigit Pratama Wiryadi had earlier told DEALSTREETASIA.
Schroder Investment Management Indonesia has launched a global sharia-equity based dollar mutual fund called Schroders Global Sharia Equity Fund. Sharia Supervisory Board Member of Schroder Mohammad B Teguh Perwira explained that the Fund has leading edges, including variety of selected shares that comply with sharia principles.
“The public may no longer be hesitant about the selected shares in the product as they meet sharia principles,” he said, in a statement after launching of the product.
The company has appointed Citi Indonesia as custodian bank for the product. Citi Indonesia CEO Batara Sianturi said, the product provides opportunities for local investors to get access to the global capital market.
Securities firm PT BNP Paribas Investment Partners director and marketing head, Maya Kamdani Siboe said, their instrument would allocate 80 per cent to 100 per cent of its funds to invest in companies’ stocks in developed countries, such as the US, Japan and European countries, and would use the Dow Jones Islamic Market Index as its benchmark. BNP Paribas is hoping the new product will have up to $100 million assets under management.
As per the norms, the fund management companies can only invest in overseas sharia stocks issued by companies whose countries are members of the International Organization of Securities Commissions (IOSCO) and full signatories of the Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (IOSCO MMOU).
The funds will be able to invest in member countries of the IOSCO in South and North America, France, South Korea and the United Kingdom.