Asset Management

Asset Management


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Friday, 24 March 2017 17:04

FAQ


Dealing with Current Market Condition
When an investment management company is declared bankrupt, will my funds be gone?

No. All of the clients’ money will be kept and registered at the Custodian Bank. The clients’ assets in the Investment management report are not included in the Investment Manager Financial Report, thus the Investment Manager has no rights to use the clients’ funds for its purpose or benefits.

When a Custodian Bank is declared bankrupt, will my funds be gone?

No. Just like in an investment management company, the clients’ funds will not be included in the Custodian Bank Financial Report. The clients’ funds will still be available. In line with Bapepam and LK regulations, prior to the declaration of bankruptcy from the Custodian Bank, Bapepam and LK will announce a substitute Custodian Bank to take over the tasks of the Custodian.

Is my investment at Ciptadana secure?

Yes, your investment is secure. CAM is a strong investment management company with a proven track record of success. It is also supported by the Ciptadana Group that owns PT Ciptadana Securities and PT Ciptadana Multi Finance. All of the Mutual Funds that are being managed by CAM are accredited and kept in the Custodian Bank's custody, at Deutsche Bank AG, Jakarta Branch.

Do I have to withdraw my investment funds from Mutual Fund, now?

No. A Mutual Fund is a long-term investment product, therefore you are advised not to withdraw or close your Mutual Fund account due to temporary market volatility.

What is Ciptadana's strategy at this moment?

Ciptadana's strategy is to monitor market conditions and actively participate in buying or selling stocks and/or bonds, taking advantage of long-term growth in what we believe to be a steadily strengthening Indonesian Stock Market.

In present market conditions, is it possible that the Net Asset Value of a Mutual Fund becomes zero?

Net Asset Value will never become zero.  The assets in the Mutual Fund portfolio, which consists of publicly listed stocks, fixed income instruments (bonds), and money market instrument (fixed deposit, cash) may decrease in value, but will never go to zero.

Currently, Ciptadana Asset Management (CAM) is placing their Mutual Fund portfolio in selective stocks and bonds with good investment value.

 

What is a Mutual Fund?

A Mutual Fund is a vehicle used by an Investment Manager to gather funds from the public to be invested in a Securities Portfolio. A Mutual Fund is a simple investment medium for anyone with a mutual long-term investment objective.

The fund is managed by a professional investment manager whose task is to manage investors’ funds to achieve their investment objectives.

Why is every one advised to have a Mutual Fund?

To generate additional income over the long term and to save for the future. The Mutual Fund frees investors from complex financial issues by using professional managers to manage the investment.

What are the advantages by investing at Mutual Fund?
  1. Professional Managers

    Mutual Funds are managed by superior Investment Managers who know how to find the best investment opportunities. Investment Managers research thousands of investment opportunities for a Mutual Fund's stock/unit holders, choosing the types of investment that will best achieve the Fund's investment objectives.

  2. Liquidity

    Liquidity refers to the ability to manage the flow of cash in and out of the Mutual Fund. In this case, the most suitable product is a Mutual Fund for stock that is listed at the Stock Market where transactions happen everyday, unlike Future Deposits or Term Deposit Certificates.

  3. Diversifications

    Diversification refers to avoiding placing all your funds in one investment opportunity. The objective of diversification is to distribute the risk factor. An Investment Manager will select a range of stocks from a number of different types of companies, so that the performance of one stock will not affect the overall Mutual Fund performance.

    By way of comparison, if you buy stocks direct, on your own, you are allowed to buy only one kind of stock, and your portfolio value will be fully dependent to the performance of that stock value. If the performance is good, you will get a good return. But, if the value decreases, your loss percentage could be as much as your investment. Diversification helps to balance it out.

    Example of the benefits of diversifications:

    Imagine you invest IDR 5,000,000 in a Mutual Fund comprising many different stocks. 1% of your fund is invested in Company XYZ. The next day, the biggest competitor of XYZ has a major win and XYZ stock value decreases 25 per cent. If you invested all your funds in XYZ stock, then your IDR 5,000,000 will decrease to IDR 3,750,000. But with a Mutual Fund, where XYZ stock only represents 1 per cent, that decrease of value has very little effect.

How does the ownership and price of Mutual Fund stocks work?

Mutual Fund ownership comes in a form of stock unit. You, as the investor, have a number of units in the Mutual Fund, depending on the value of your investment. Investors receive part of the returns or losses each time. Every Mutual Fund has a stock price known as Net Assets Value, which is the value of every Mutual Fund stock unit. Most Mutual Funds tally their stock prices everyday, or every week.

This is due to the dynamic changes of the stocks in a Mutual Fund's portfolio reflecting the movement of the stock and financial markets. Mutual fund stock prices are determined by dividing the Mutual Fund portfolio's value with the amount of stock being distributed from Mutual Fund.

For example: Mutual Fund ABC has an investment value of Rp 2,000,000.000, while the stock amount that has been distributed is IDR 500,000 pieces, so the stock price per Mutual Fund ABC unit is IDR 4,000.

Example: Effect of Mutual Fund stock price changing.
In January, you invested IDR 10,000,000 in a Mutual Fund with a price per unit stock IDR 10,000 so the amount of Mutual Fund stock that you have is 1,000 units.

In March, the stock prices decreased, so the price of the Mutual Fund stock per unit decreased to IDR 9,000. You still have 1,000 stocks but your total investment value becomes IDR 9,000,000.
In June, the Mutual Fund price per unit increases to IDR 11,000, so your investment increases. You still own 1,000 units but total investment value has risen to Rp. 11,000,000.

What kind of Mutual Fund that you can buy?

In general, all of the Mutual Fund types are similar in their structure, but different in their objectives. Mutual Funds can focus on security and stability, fixed income, or long-term growth.
The important thing is to determine your goal before choosing a particular type of Mutual Fund:

  1. Fixed Income Fund: for stability.

    A Fixed Income Mutual Fund, focused on security and stable returns, invests in good quality fixed income instruments, such as Certificate Deposits (CD), Commercial Paper (CP), and bond certificates issued by private corporate, state-own corporation (BUMN), government entities etc. These instruments give higher returns than bank saving but are still conservative. Fixed Income Funds are suitable for those who prefer short-term investment or who don't want to take the risk of losing some of their investment. But big returns cannot be expected if you take into consideration the annual rate of inflation.

  2. Equity Fund: for the long-term.

    An Equity Fund is a Mutual Fund that invests in stocks listed on the Stock Market, which represent ownership in a company. Equity Funds are suitable for those who prefer a long-term investment, over several years or decades.

    The idea behind Equity Funds is that even though stock prices tend to increase or decrease in the short term, history has proven that Equity Funds provide bigger returns over the long-term than Fixed Income Funds.

  3. Balanced Fund: Combination of fixed income stability and long term equity growth

    A Balanced Fund is a Mutual Fund that is invested both in fixed income instruments as well as company's stocks listed on the Stock Market.

    This type of Mutual Fund optimizes returns through stock performance on the Stock Market whilst being being supported by Fixed Income instruments.

Why is LONG-TERM VISION important in investment?

Investment with a long-term vision is not just important, but also a good idea, especially in relation to pension preparation.

It is easier to show with an example:
At age 10 you inherit IDR 5,000,000, and you invest it at 20 per cent return per year. When you graduate from High School at the age of 18, your investment is worth IDR 21,500,000. If you keep your money as an investment, by the time you graduate university, your investment will have become IDR 191,700,000. When you reach the age of 50, it becomes Rp. 7.35 Billions, and so on, until you reach 65 years old, and your investment reaches IDR 113.200,000. Incredible!

How do you choose a Mutual Fund?

The first step is to determine the Mutual Fund most suitable for your needs, terms of investment, and the way you manage your finances.

Every investor, whether beginner or expert, starts with a common goal, which is to save for their pension, cover educational expenses, maintain their lifestyle, and to receive income. In every case you have to determine your own investment goal and the risk that you are willing to take.

As mentioned earlier, if you have more time than money, then you should choose a Mutual Fund that gives higher potential over the long-term, because you do not have to worry about fluctuations in the short-term.

How do you choose an Investment Management Company?

After you decide the type of Mutual Fund that is suitable for your goal, the next step is to choose the Investment Manager.

There are a few things that should be considered:

  1. Trust
    It can be based on reputation or size of the company, or the holding company behind it.
  2. Experience
    In this case, you have to look at their performance in managing their existing Mutual Fund, and their consistency over the long-term.

This is important, because a good short-term performance is not always an indication of good long-term performance.

What will it cost you?

If you compare the cost of investing in Mutual Funds with the time that you need to choose stock for your Stock Market instrument directly from the Stock market, then you will realize how economical a Mutual Fund is.
There are three kinds of costs associated with Mutual Funds.

The first is the cost for annual management of the Mutual Fund. You do not have to pay that cost directly, but it is included in the Mutual Fund value. The management cost for a Stock Market Mutual Fund is usually not more than 1 per cent per year and for an Equity Fund is 2.5 per cent per year.

The second is the placement/buying cost which is paid in advance. The cost varies between 0 to 6 per cent, depending on the type and placement for each Mutual Fund.
The last cost, which some Mutual Funds apply, is a withdrawal cost, which is paid when you sell or withdraw your investment.

How to buy and sell

As soon as you decide on your choice of Mutual Fund, call the Investment Management company that manages that Fund. You will be asked to fill out an application buying form and return it with your payment receipt or bank transfer.

After all of the requirements are fulfilled and approved by the Investment Manager, your ownership in that Mutual Fund is effective. As proof of ownership, you will receive a buying contract.
The same thing applies when you want to sell the Mutual Fund. You just have to fill in a selling form and submit it to the investment manager company.

In general, you will receive the cash one week after withdrawal. Buying or selling transactions can be completed on a daily or weekly basis depending on each Mutual Fund regulation.

Is mutual fund tax deductable?

Buying and reselling Mutual Fund units are not tax deductable.

Mutual Fund investment (especially in equity funds) is a long-term goal.

Time is on your side, assuming that your Investment Manager invests on buying stocks in solid companies, and is supported by good management and superior business planning. Alternatively, a good investment is about being a partner in a good company, enjoying the returns that company earns from time to time.

True investment is not about predicting stock price fluctuations over the short term. There are some people who think that they can predict movements and become wealthy by selling and buying stock on the Stock Market anytime. As professional investors who have been dealing for more than 10 years, we are sure that no one, including ourselves, can do such things successfully and consistently.

So, what lessons can be taken from Stock Market fluctuation?

Don't panic ... be patient ... and enjoy long-term success.
Try to read the Stock Market table once a month, or even better, once a year. If anyone tells you that some stocks have rapidly decreased in value, the first thing to think is "Good! It is time to buy some more!"

Remember that investing is not easy. Throughout every year, Stock Market values decrease or even fall, and it's tempting to sell your stocks before they fall further. This kind of act is not recommended. By holding your stocks, you can actually save your money.

So, when is the right time to sell? Actually, there is no right time. Your Investment Manager will sell your stocks, but only if they know something really important has happened at the company, such as failure of a newly launched product, increasing competition etc. Good Investment Managers with long-term orientation never ever sell stocks due to high prices or panic selling. Remember ... do not sell your stocks or Mutual Funds unless you have achieved the goal you set when you bought them.

In a nutshell, buy stocks/Mutual Funds using funds that you do not need in a short term. And do not forget that "time period" in this case is more important than "timing" itself.

So, what lessons can be taken from Stock Market fluctuation?

Don't panic ... be patient ... and enjoy long-term success.
Try to read the Stock Market table once a month, or even better, once a year. If anyone tells you that some stocks have rapidly decreased in value, the first thing to think is "Good! It is time to buy some more!"

Remember that investing is not easy. Throughout every year, Stock Market values decrease or even fall, and it's tempting to sell your stocks before they fall further. This kind of act is not recommended. By holding your stocks, you can actually save your money.

So, when is the right time to sell? Actually, there is no right time. Your Investment Manager will sell your stocks, but only if they know something really important has happened at the company, such as failure of a newly launched product, increasing competition etc. Good Investment Managers with long-term orientation never ever sell stocks due to high prices or panic selling. Remember ... do not sell your stocks or Mutual Funds unless you have achieved the goal you set when you bought them.

In a nutshell, buy stocks/Mutual Funds using funds that you do not need in a short term. And do not forget that "time period" in this case is more important than "timing" itself.

Primary Risk Factors
  1. Risk of changing economics and politics conditions.
    The Indonesia economy is vulnerable to changes in the international economic environment. Fluctuating economic or political conditions, inside or outside the country or the regulated environment, especially in Capital Markets and Stock Markets, can affect the performances of companies in Indonesia, including those companies listed on the Indonesian Stock Exchange that will affect Mutual Funds portfolio performance.
  2. Risk of decreasing The Decrement of Unit Value
    The Decrement of Unit Value of Mutual Funds will fluctuate subject to increasing or decreasing Nett Asset Value Mutual Fund. Decreases can happen due to:
    • Changes in Equity Securities and other Securities.
    • Charges that investors pay for every buying or selling transaction.
    • Risk in the event of Default by a correlated party. This can happen if a business's partners or the Investment Manager fails to fulfil their obligations. These business partners could include issuers, traders, a Custodian Bank, and selling agents.
    • Liquidity Risk, which refers to reselling that depends on portfolio liquidity or the capability of Investment Manager to re-buy (pay) with cash.
    • Loss of transaction opportunity when Processing Insurance Claims. This means that, in the case of lost or damaged commercial papers, and with Mutual Funds kept in the Custodian Bank, the bank, protected by insurance, will pay for the new Commercial Papers. During that period, the Investment Manager cannot execute investment transactions on the papers. Losing transaction opportunity can affect Nett Asset Value per The Decrement of Unit Value.
Do you need a big fund to invest in Mutual Funds?

No, you do not need a big fund. Usually a Mutual Fund has a minimum investment requirement, but the amount is relatively small compared to many portfolios. Usually the minimum requirement for every decrement in between is IDR 500,000 until IDR 5,000,000.

What is Ciptadanaâs strategy at this moment?

Ciptadana’s strategy is to monitor market conditions and actively participate in buying or selling stocks and/or bonds, taking advantage of long-term growth in what we believe to be a steadily strengthening Indonesian Stock Market.