Thank you for submitting the manuscript "Development Dynamics and Business Settings of Mutual Funds in Indonesia" to International. Purpose: This paper discusses the development of mutual funds in Indonesia and the regulation and supervision of investment managers and custodian banks in mutual funds in Indonesia. Practical implications: In practice, there are forms of mutual funds in the form of companies and collective investment agreements.
In Indonesia, mutual funds are given the mention of mutual funds, as stipulated in Article 1 of Law No. In the European region, mutual funds are considered relatively new investment media, especially in France. Changes in these conditions increase the national investors' interest in mutual funds (Gori-Montanelli & Botwinik, 1969).
In the Asian region, the development of mutual funds in India and Pakistan has had a similar history. First, mutual funds can be in the form of a company or in the form of a collective investment contract. Investment funds in the form of collective investment contracts can only be managed by asset managers on a contract basis.
The process of investing through mutual funds in the form of a Collective Investment Contract is simpler.
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Development and Setting of Mutual Funds in Indonesia
Introduction
Mutual funds are also considered as an opportunity for investors to be able to invest in investment portfolios such as stocks and bonds in the capital market, money market securities and some commodities in the derivatives market. 8 of 1995 in the general provisions, that mutual funds are containers used to collect funds from the investor community for further investment in the portfolio of securities by the Investment Manager. In the current capital market activities in Indonesia, there is a forum that is used to raise public funds and is managed or invested in a portfolio of securities by an investment manager.
The latest innovation in Indonesia for mutual funds is the birth of protected mutual funds, which will ensure the protection of the principal of their investment for a certain investment period. Investors who wish to participate in mutual funds must be prepared to have their funds locked up for a certain period of time. Investors are gradually returning to mutual funds, mutual fund companies are gradually converting their mutual fund portfolios into protected mutual funds. More specifically, this paper aims to show the development of mutual funds in Indonesia together with the key role of regulation and supervision of investment managers and custodian banks in mutual funds.
The method used is a doctrinal research, a legally normative research based only on secondary data. This research will analyze and examine secondary data in the form of legal material such as laws, regulations and guidelines of the capital market in general (Law No. 8 of 1995) and the mutual market in detail.
Mutual Funds in International Level
In China, the development of mutual funds is being gradually developed through the development of ethics and characteristics of mutual funds that are in line with other countries (Feng and Johansson, 2015). Criticism against mutual funds arises over the costs that investment managers in mutual funds charge to investors, which makes the image of mutual funds negative (Adams et al., 2018). There is a study that says that mutual funds still have social obligations related to the character of the business.
This social craft is not only borne by the issuers and investors, but is also an obligation of mutual funds (Statman, 2020). The relationship between mutual funds and investors can be used as one of the operational characteristics of mutual funds. Mutual funds have a high degree of trust from its investors, who entrust a number of investment funds to be rotated and generate profits (Kostovetsky, 2016).
It is evident in a study conducted in China that issuers whose shares are owned by mutual funds significantly improved company performance (Yuan et al., 2008). Similar developments have also taken place in India, where Indian government initiatives to relax the adoption of the tax on investment in mutual funds are making investors enthusiastic about using mutual funds, and the funds absorbed from mutual funds are being felt by the issuing companies. (Mishra and Kanti, 2012). The interest of investors to invest through mutual funds in France did not experience a significant increase because mutual fund marketing was concentrated by banks (Beggans, 1969).
Italy on the other hand for a few years mutual funds selling securities in Italy were mutual funds from outside Italy, until the 1990s when this new condition changed. Changes in these conditions increase national investor's interest in mutual funds (Gori-Montanelli and Botwinik, 1969). The growth of mutual funds in Pakistan is very high due to the support of the Pakistani government in investment and banking (Shah et al., 2005).
The Government of India encourages the growth and development of mutual funds by making strict regulations on the establishment of mutual funds and the marketing of mutual funds (Mishra and Kanti, 2012). The nature of an investment fund in accordance with Islamic rules plays a major role in the issue and marketing of investment fund securities. The development of Islamic mutual funds in Malaysia and other countries offers investors the opportunity to choose their investments in mutual funds (Atta and Marzuki, 2019; Suadi, 2018).
Mutual Funds Development in Indonesia
Investment associations in the form of collective investment contracts involve in the performance of their tasks investment managers and custodian banks, where both institutions sign a contract with an investor who owns a cooperative unit. In the contract, the investment manager will be authorized to manage the collective investment portfolio and also mention that the custodian bank will be authorized to perform collective custody. Based on the categorization provided by the Indonesian Finance Authority, investment funds are divided into several types, first are money market funds, which will only invest in debt securities with maturities of less than one year with the aim of maintaining liquidity and maintaining capital.
Second, mutual funds or mutual funds that make a minimum investment of 80% of total assets in debt securities, this type of mutual funds risk greater than money market funds and the goal is to produce a stable return on investment.
Custodian and Bank Managers in Mutual Funds in Indonesia
These contracts are concluded between investment managers and custodian banks, which also bind the unit holders as investors. With these contracts, investment managers are authorized to manage joint portfolios, and custodian banks are authorized to perform joint custody and management (Utomo and Nugraha, 2009). Investment managers in the process of creating mutual fund contracts will take the initiative to issue mutual funds through the registration statement process at the OJK in order to sell an investment unit to a public investor without the need to establish a company.
Before implementing the registration statement process, the Investment Manager must first identify a custodian bank in order to enter into the contract. Investment managers are parties whose business activities manage the portfolio of securities and sell units in the portfolio to investors, both institutional and individual investors. The investment manager will invest funds together with other funds that also purchase the same investment fund unit as the investor.
8 of 1995 Regarding Capital Market, investment managers are the parties whose business activities are the management of securities portfolios for clients or the management of collective investment portfolios for a group of clients, except insurance companies, pension funds and banks that conduct their own business activities based on laws and regulations. In the performance of his duties to manage the funds performed by the investment manager is based on a contract. The success of an investment manager can be indicated by the amount of funds entrusted to the investment manager.
The larger the managed client funds means the greater the client's confidence in the investment manager's expertise and integrity. The role of investment managers is to carry out the mission of mutual fund institutions, which is to sell mutual fund products, while fulfilling the obligation to buy back mutual fund products when they are sold by investors. Investment managers as executors of a mutual fund mission must sell as many mutual fund products as possible, while investment managers as executors of mutual funds repurchase obligations are only bound by the Net Asset Value (NAV) limit.
Mutual fund investors can select investment managers and purchase mutual fund products offered by investment managers based on investors' investment needs. Investment managers generally have the primary responsibility of managing mutual funds collected from investors in good faith and with a sense of responsibility. Custodian banks have obligations ranging from calculating the net asset value (NAV) of mutual funds to keeping records with respect to asset managers and investors.
Conclusion
Purpose: This paper discusses the development of mutual funds in Indonesia and the regulation and supervision of investment managers and custodian banks in mutual funds. The development of mutual funds in the world, which began in the 18th century in the Netherlands. The two mutual funds in the form of a company can be open or closed, in which the company has received approval from the capital market authority (CMA).
Investment associations in corporate form are investment association issuers whose business is to sell shares. 8 of 1995 regarding the capital market mentions mutual funds as a container used to collect funds from the investor community to be invested in securities portfolios by investment managers. Mutual funds are companies or collective investments of investors that are invested in securities of investment managers.
The mutual fund company then manages the investment, the investment management is carried out by the investment manager. 8 of 1995 regarding the Capital Market stipulates that mutual funds must fulfill their obligations in the management of their clients' funds. The development of forms of mutual funds in Indonesia is quite dynamic, providing opportunities for new types of mutual funds to market.
