March 14, 2016: Danareksa Investment Management (DIM), winner of the IFM award for Most Innovative Asset Management Company Indonesia 2015, is the first asset management company established in Indonesia and has become one of the most respected fund managers in the country. DIM’s business was essentially founded in 1976 as the first capital market company in Indonesia and laid out the very foundation of capital market platform in Indonesia. The name of Danareksa Investment Management (DIM) was merely formalised in 1992 with PT Danareksa (Persero) as the parent company.

In 1995, the government of the Republic of Indonesia launched the Capital Market Law number 8/1995 with the aim of regulating the capital market in Indonesia. In 1996, it pioneered the very first mutual funds in the country through the following products: Danareksa Melati (fixed income fund), Danareksa Anggrek (balanced fund) and Danareksa Mawar (equity fund).

Within the realm of mutual funds, we have 17 open-end funds which cover asset classes with different focuses and strategies in the following categories: money market funds, fixed income funds, balanced funds and equity funds.

Innovation is in the DNA of the company. It launched Reksa Dana Danareksa Syariah – the first Islamic-compliant mutual fund in Indonesia. It was followed by another innovation — USD-based funds and a Sharia-based index fund.

Aside from mutual funds, it is the only asset management company that is also issuing Asset-Backed Securities (ABS) products in Indonesia. Since there are no other asset management companies offering ABS in Indonesia, it is the natural leader in the industry.

It has offered an alternative in real-sector financing through state-owned enterprises by launching private-placement funds that strengthens its position as the only investment company offering private-placement products.

Its in-depth technical knowledge, strong clientele relationships, close-knit tie with regulatory entities and robust research capabilities make the ABS and private-placement funds offering process possible.

Investment education has been its on-going socialisation program to teach the community the importance of investing.  It invented ‘My Investment My Future’ program to encourage investors to start investing small consistently early on over time (dollar cost averaging) for long-term horizon by automatically debiting their saving accounts on a monthly basis.

Technology also helps the company get closer to its investors. We were the first fund manager to offer mutual funds directly online. Through its Online Mutual Fund services, it is offering retail clients the facility to register and invest in its mutual funds through the internet. It subsequently developed Mobile Mutual Fund where clients can subscribe to or redeem funds through their mobile phones. These online services were the logical strategy to reach them efficiently.

The post Pioneer of mutual fund industry in Indonesia appeared first on International Finance.

February 24, 2015

Indonesia has the largest Muslim population in the world. How is the Sharia Fund doing in the country?

The first Sharia Mutual Fund in Indonesia was launched in 1997 and the Jakarta Islamic Index, the first Islamic Index in Indonesia, was launched in 2000. Growth of the Sharia Fund growth is not as fast as that of non-sharia funds. The total Asset Under Management for the Sharia mutual fund industry at the end of December 2014 is only around 5 percent ($950 million) of the total ($18.6 billion).

What are the opportunities and challenges for Sharia investment in Indonesia?

Sharia based investment has very good prospects in Indonesia. Indonesia’s economic growth is above the average of the world economy. At present, Indonesia is headed by an elected president Joko Widodo. It makes Indonesia very attractive for investment in the capital markets. We believe that the growth of Islamic stock market will be more than 15% in 2015 and growth will continue for the next few years.

The challenge for Sharia investment in Indonesia is lack of understanding. Some of Indonesia’s investors consider the stock market as ‘gambling’. Hence, they are reluctant to invest in the capital markets. Investors need education.

What should you do to grab the opportunity?

The role of an investment manager is to educate the community about Sharia investment. We will also try to create more Sharia investment alternatives as the number of instruments in the market is limited.

Meanwhile, we will continue to manage our Sharia Fund, perform consistently and deliver good performance.

How you see the investment opportunity in 2015?

There are two major investment themes in 2015: falling oil prices and possibility of the Fed hiking interest rate. A fall in oil prices should be positive to Indonesia’s effort in lifting unproductive subsidies. It also increases consumer purchasing power through lower energy prices and benefits companies’ profit margin, especially sectors that have significant energy cost.  Therefore, consumer, automotive, telecommunication, infrastructure, construction and basic industries sectors, which represent more than 75% of the Jakarta Islamic Index, will benefit. On the other hand, the possibility of interest rate hike by the Fed this year will hurt financial and property sectors, which have very low weightage in the Jakarta Islamic Index. We believe Islamic funds will deliver a good performance in 2015.

You have won the IFM award for Best Islamic Equity Fund in Indonesia. What does this recognition mean to you?

We had never thought that our Cipta Syariah Equity (CSE) fund would get recognition at the international level. CSE Mutual Fund has got several domestic and international awards. However, this is the first time we received recognition from a major institution like International Finance Magazine. We are confident of supporting the Islamic mutual fund industry, especially in Indonesia and have a great chance to grow rapidly in the future.

About Ciptadana Asset Management PT Ciptadana Asset Management (CAM) is one of first investment companies licenced by Bapepam (Indonesian Capital Market Regulatory). It was established in 1991 and received its investment management licence from Bapepam in April 14, 1992.

It manages various mutual funds that invest in Indonesian equities, fixed income instruments, as well as providing structured funds management services, tailor-made for each client, whether high net-worth individuals or institutions. Investment strategies are designed to reflect each client’s financial assets, obligations and risk appetite, and to achieve their investment goals.

In 1992, CAM launched Indonesian Growth Fund, which is a pioneer in the Indonesian mutual fund industry. In 2012, it launched DIRE Ciptadana Properti Ritel Indonesia, which was a pioneering real estate investment opportunity in Indonesia.

Advertorial

The post ‘The challenge in Indonesia is lack of understanding’ appeared first on International Finance.

Tim Evershed

November 28, 2014: Takaful insurance can have a bright future in Europe due to its parallels with the mutual sector, according to panellists at International Finance Magazine’s EU Islamic Finance and Banking Summit that took place in London on November 18-19.

Non-marine mutual insurance can trace its roots in Europe back almost 1,000 years to Icelandic farmers who pooled their resources to provide protection. More recently, the sector grew exponentially during the Industrial Revolution, driven by the migration of people from rural to urban communities.

And despite a spate of de-mutualisations in the 1990s, the past decade has seen a revival of the model, partly in response to the financial crisis of 2008.

John Gilbert, Consultant, Hogan Lovells International, said: “Mutual insurers are takaful insurers that are already in existence; they are takaful in disguise. Now the Islamic finance industry is stepping away from that disguise.”

Past attempts to launch takaful insurance companies in Europe have foundered. In 2008, Principle Insurance Holdings raised £60mn from investors across the Middle East and Malaysia in order to launch Salaam Halal Insurance.

However, less than a year later, the company stopped accepting new business and was placed into “solvent run-off” after a rights issue failed to raise sufficient funding.

According to Faizal Karbani, Founder and CEO of Simply Sharia Ltd, this has left a gap in the market. “As a financial adviser in the Islamic space, I don’t have the protection products to sell to my clients. There is a great, great opportunity because this is very much needed because every human being has the need for financial protection.”

Historically, many Muslims have been put off the idea of insurance as it can be interpreted as a form of gambling when risk is sold for a fixed term. However, the panellists agreed that mutual insurers, friendly societies and P&I Clubs, with their technique of pooling risk, have the potential to serve the Islamic market.

Clive O’Connell, Partner, Goldberg Segalla Global said: “This is a business with products that can be very international. The problems that stand in the way of takaful can be resolved if one looks at it in a broader way.

“The biggest challenge to Takaful and to the mutual sector is Solvency II. Mutual insurers find it more difficult to comply with Solvency II than other forms of insurance.

“However, mutual insurance is something that everyone wants. After 2008, big anonymous banks and big anonymous insurers are no longer very attractive. The idea of pooling together to mutually insure each other is very positive for Muslims and non-Muslims alike. It is something we all have in common.”

The mutual sector in the UK is 9-10% of the market and growing; in Germany, it is 60% and in France 40%. Bilal Zafar, Senior Business Development Manager, Swiss Re, explained that one of the world’s biggest reinsurer is ready to support takaful insurers with sharia compliant reinsurance products.

He said: “In the takaful space, a lot of the groundwork needs to be done by our clients. So, we rely on our clients. They must have the expertise to run the business in the right way. What we provide is the financial backing and the guarantee that our business model will be sharia compliant. I think it is important for us to work with people bringing this business model to different parts of the world.

“In order to support our model we require a certain volume of business. Unfortunately, it has not taken off in Europe yet, but it is just a matter of time. From out perspective, we are waiting for that time to come. We have spoken to a lot of people in the UK and are looking for ways to support them and provide them with Retakaful backing. That is very important for insurance companies, particularly for start-ups.”

Related report:

Spike in interest rates could hamper Islamic finance

The post Market for takaful in Europe is looking brighter appeared first on International Finance.