Social Networks and Credit Access in Indonesia

Summary: In this paper, we investigate how family and community networks affect an individual’s access to credit institutions usingnew data from the Indonesia Family Life Surveys. Our theoretical framework emphasizes the family and community’s role in providinginformation, thus loweringthe search costs of the borrower and monitoringand enforcement costs for the lender. From our empirical results, community and family networks are important in knowinga place to borrow, as well as for loan approval. Consistent with an information-based explanation of networks, family and community networks have a larger impact on credit awareness of new credit institutions with a lower impact on awareness of established credit sources. Interestingly, we find that women benefit from participatingin community networks more than men. There is no evidence that the rich benefit from community networks more than the poor. Our results on the benefits from participation in the community network are robust to the inclusion of community fixed effects.

 

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Evaluating mutual fund performance in an emerging Asian economy: The Malaysian experience

Abstract: This paper examines the performance of 311 mutual funds from January 1990 to December 2005 in Malaysia by using composite portfolio performance measures, the single market model, the Fama and French three-factor model, and the Carhart four-factor model across investment horizons. Overall, we have found evidence that mutual fund performances yield superior returns with relatively lower systematic risks. A 3-year investment appears to be the preferred investment horizon with the highest annualized returns of 9.23%. The results of the single market model, the Fama–French three-factor model, and the Carhart four-factor model have all indicated that beta, size, book-to-market value, andmomentum factors are significant factors in explaining equity fund returns with the Carhart four-factor model being the relatively better model among the three. The beta factor has demonstrated the highest coefficient and significance. The results further indicate that the average equity funds in Malaysia hold smaller market capitalization stocks and value oriented stocks, as well as buying past-winning and selling past-losing stocks.

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Mutual fund styles

Mutual funds are typically grouped by their investment objectives or the 'style' of their managers. We propose a new empirical to the determination of manager "style.' This approach is simple to apply, yet it captures nonlinear patterns of returns that result from virtually all active portfolio management styles. Our classifications are superior to common industry classifications in predicting cross-sectional future performance, as well as past performance, and they also outperform classifications based on risk measures and analogue portfolios. Interestingly, 'growth' funds typically break down into several categories that differ in composition and strategy.

 

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Management team structure and mutual fund performance

We investigate the relationship between performance and portfolio management team structure of open-end mutual funds during 1997–2004. We first analyze differences in performance and risk taking between single-manager and multiple-manager mutual funds and find that the latter underperform the single-manager funds in terms of risk-adjusted returns during the 2001–2004 bear market. This underperformance is more evident among growthoriented funds. There are no differences observed in the 1997–2000 bull market. Not all multiple-manager funds, however, are managed by pure teams. When we compare the performance of single-manager and pure-team fundswedo notfindany differences in performance. The underperformance of multiple-manager funds documented in previous studies comes from multiple-manager funds that employ many investment advisors and, therefore, their exact management structure is unknown. We also document differences in management structure reporting between Morningstar and CRSP.

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Management structure and the performance of funds of mutual funds

A rapidly growing mutual fund category is funds of funds (FOFs) which invest in other mutual funds instead of individual securities. This study reports on FOFs' characteristics and performance relative to traditional equity mutual funds and finds that FOFs compare favorably. FOFs with identified managers outperform their unidentified counterparts, and FOFs that invest in-family outperform both traditional equity funds and those FOFs investing out-of-family. Finally, replicating FOFs' holdings can be prohibitively expensive since they commonly hold funds with high minimum initial investments, closed funds and/or funds that are restricted o a particular investor type.

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Check Out Indonesia

BRIC countries (Brazil, Russia, India, and China) can offer a potentially high-growth, long-term investment opportunity. Their large populations, rich natural resources, and strong export growth typically attract attention and, in general, these emerging markets have produced solid performance over the past several years. However, with the limelight on the BRIC countries, investors may be missing out on a less-discussed, but potentially stronger performing market: Indonesia. The same factors that have driven high performance in BRIC countries exist in Indonesia. Additionally, each of these factors has the potential to substantially increase the future output of the Indonesian economy

• Population. Indonesia is currently the world's 4th most populous nation with roughly 240 million people, behind only China, India, and the United States. This provides ample domestic demand, and a large pool of low-cost laborers to fuel productivity. 
• Rich natural resources. Large domestic oil and metals deposits provide a substantial base of resources for domestic production. As the world's largest producer of tin, and with the second largest natural gas reserves and the third largest coal reserves, commodity exports play a large role in the Indonesian economy
• Strong economic fundamentals. The Indonesian economy has benefited over the past several years from a democratization movement which began in 1999. The government instituted economic reforms, which have led to a substantial reduction in the country's debt-to-GDP ratio, now at roughly 30 percent. Interest rates are low, signaling a central bank focused on economic growth. And while inflation has been steady between 5 and 6 percent annually, the GDP growth rate has continued to be strong. In fact, despite the 2007-2009 financial crisis, Indonesia's economy avoided recession.  
• Differences from the BRICs. Although Indonesia has large domestic oil reserves, they have recently become a net importer of oil. This means that the supply of crude in the economy is mostly insulated from the wild price swings and productivity costs that many of the BRIC economies have faced. It also means that Indonesians don't have to compete with China and other emerging markets for access to the global supply of oil. The democratization movement that took hold in the late 1990s has made significant progress in liberalizing the country. As an added benefit to investors, the government has recently enacted pro-growth policies and economic stimulus programs that have improved growth rates and general economic stability. In fact, some estimates range as high as 20 percent annual growth in private investments year over year. Energy independence and a relatively stable political system have allowed Indonesia to enjoy a substantial increase in foreign investment, especially in contrast with China―where direct investment is difficult. Investors have easy, direct access to Indonesian equity and debt markets. Whether you hold a broad emerging markets portfolio, a more specific BRIC portfolio, or are considering your first investment into emerging markets, now may be a good time to consider Indonesia. Over the past several years, a comparison between the BRIC countries and Indonesia shows that Indonesia offers a lower volatility profile with higher potential total returns. A strong infrastructure, stable government, attractive natural resources, and robust exports make this "sleeper" emerging market worth a look.

 

Timothy R. Lee, CFP®, is a managing director and cofounder of Monument Wealth Management in Alexandria, Va., a full-service investment and wealth management firm. Monument Wealth Management is backed by LPL Financial, an independent broker-dealer and Registered Investment Advisor, member FINRA/SIPC.

Manulife Asset Management Indonesia is First Syariah Mutual Fund

Manulife Aset Manajemen Indonesia (MAMI) launches its first Sharia mutual fund, called Manulife Syariah Sektoral Amanah (Manulife Sharia Sectoral Mandate) on January, 2009

This product is one of its kind in Indonesia to apply the Sectoral Rotation investment strategy which aims to maximize the investment return in long run. Sector rotation is an active investment strategy involving the movement of money between sectors in an attempt to beat the market. 

Manulife Syariah Sektoral Amanah aims to deliver superior long-term investment performance by investing in equities of Sharia compliant companies in sectors that are well placed to capitalize on emerging opportunities in the global and Indonesian economy. This product will allocate between 80-100% in Sharia equities, and 0-20% in Sharia fixed income and Sharia money markets instruments. It also aims to invest in those domestic companies which MAMI considers offer the best growth potential in their selected sectors.

 

The fund, which  be Indonesian Rupiah denominated, will be available to both retail and institutional investors. As one of the securities companies that is committed to develop the mutual fund industry and capital market in Indonesia, MAMI applies an affordable minimum investment which gives access to a broad range of investors. With also free subscription fee and no redemption charge for anyone investing for more than one year, anyone can now start investing in mutual funds. Besides selling through Manulife Indonesia’s agency force, MAMI has an exclusive bank distribution partnership with HSBC Amanah Syariah in selling this unique fund to retail investors through all HSBC Amanah Syariah branches in Jakarta, Surabaya, Medan, Semarang, and Bandung.

About Manulife Aset Manajemen Indonesia
Established in 1996, PT. Manulife Aset Manajemen Indonesia (MAMI), a member of Manulife Financial, offers investment management and mutual fund products in Indonesia. Since its establishment, Manulife Aset Manajemen Indonesia has consistently maintained its position as one of the leading investment management companies in the Indonesian mutual fund industry. Currently, MAMI serves more than 30,000 mutual fund investors. The keys to success are: a focus on customers, distribution excellence, innovative products (such as Phinisi Dana Tetap Pemerintah and Manulife Pendapatan Bulanan) and superior risk and investment management. Manulife Financial that has been operating in Indonesia for the last 23 years. This business group serves over 1,000,000 clients across all business units in Indonesia. Manulife Financial enjoys market leadership in life insurance, pension funds, investment management and mutual fund businesses. Manulife Aset Manajemen Indonesia has the largest licensed mutual fund selling agency force in Indonesia. 

The company’s products are sold across the archipelago through more than 1,700 mutual fund selling agents (WAPERDs) from approximately 100 Manulife marketing offices in more than 20 cities in Indonesia from Banda Aceh to Jayapura. In addition to Manulife Indonesia’s exclusive full time agents, MAMI products are also distributed through leading banks such as ABN AMRO Bank, American Express Bank, Bank Bukopin, Bank Commonwealth, Bank Internasional Indonesia, Bank Mandiri, Bank Niaga, Bank Permata, Bank UOB Buana, Deutsche Bank, Development Bank of Singapore, Standard Chartered Bank and The Hongkong Shanghai Banking Corporation.

About Manulife Financial
Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were Cdn$385 billion (US$364 billion) as at September 30, 2008. Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘0945’ on the SEHK.

About HSBC Group
The HSBC Group is one of the largest banking and financial services organizations in the world. The Group has about 9,500 offices in 85 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa, serves over 100 million customers and has assets of US$2,547 billion at 30 June 2008.

About HSBC in Indonesia
HSBC has operated in Indonesia since 1884. It now provides personal financial and corporate banking services through 105 outlets, spread through out 10 major cities: Jakarta (World Trade Centre, Pondok Indah, Kebon Jeruk, Sentral Senayan, Pluit, Kelapa Gading, Mangga Dua, Wisma 46, Melawai, Sunter, BSD, Gajah Mada, Plaza Kuningan, and Talavera),Surabaya, Medan, Bandung, Semarang, Solo, Batam, Bogor, Tangerang, and Depok. HSBC is a leading provider of personal financial services, corporate, commercial banking, institutional banking, treasury capital markets and Amanah Syariah services in Indonesia. HSBC in Indonesia delivered profit before tax of US$104 million in the year to 31 December 2007 and US$66 million in the half-year to 30 June 2008.

Top Mutual Fund 2011

Top Rated Mutual Funds as of September/31/2011

Fund Name	Get Info	Overal	Risk Grade
Permanent Portfolio Fund	PRPFX	A+	B
Bruce Fund	BRUFX	A+	B-
ING Value Choice A	PAVAX	A+	B-
Nuveen Tradewinds Value Opp A	NVOAX	A+	B-
Tilson Dividend	TILDX	A+	B-
Schwab Tax-Free Bond Fund	SWNTX	A+	B-
Appleseed Fund Investor	APPLX	A+	B-
Vanguard Wellesley Income Inv	VWINX	A+	B
Matthews Asia Dividend Fund Inv	MAPIX	A+	B-
ING Morgan Stanley Global Franch A	IGFAX	A+	B-
Westcore International SC Rtl	WTIFX	A+	C+
ING Global Value Choice A	NAWGX	A+	C+
MSIF Inc. Opportunity H	MEGHX	A+	C+
RiverNorth Core Oppor Fd	RNCOX	A+	C+
Oak Assoc-Live Oak Health Sciences	LOGSX	A+	C+
Nuveen Tradewinds Global All-Cap A	NWGAX	A+	C+
Wasatch World Innovators Fund	WAGTX	A+	C+
Marshall Intermediate Tax Free Inv	MITFX	A+	B
Baird Core Plus Bond Inv	BCOSX	A+	B
Prudential Total Return Bond A	PDBAX	A+	B-

Three Basic Type of Mutual Fund by Investment Company Act of 1940

Open-end funds

Open-end mutual funds must be willing to buy back their shares from their investors at the end of every business day at the net asset value computed that day. Most open-end funds also sell shares to the public every business day; these shares are also priced at net asset value. A professional investment manager oversees the portfolio, buying and selling securities as appropriate. The total investment in the fund will vary based on share purchases, share redemptions and fluctuation in market valuation. There is no legal limit on the number of shares that can be issued. 

Closed-end funds

Closed-end funds generally issue shares to the public only once, when they are created through an initial public offering. Their shares are then listed for trading on a stock exchange. Investors who no longer wish to invest in the fund cannot sell their shares back to the fund (as they can with an open-end fund). Instead, they must sell their shares to another investor in the market; the price they receive may be significantly different from net asset value. It may be at a "premium" to net asset value (meaning that it is higher than net asset value) or, more commonly, at a "discount" to net asset value (meaning that it is lower than net asset value). A professional investment manager oversees the portfolio, buying and selling securities as appropriate.

Unit investment trusts

Unit investment trusts or UITs issue shares to the public only once, when they are created. Investors can redeem shares directly with the fund (as with an open-end fund) or they may also be able to sell their shares in the market. Unit investment trusts do not have a professional investment manager. Their portfolio of securities is established at the creation of the UIT and does not change. UITs generally have a limited life span, established at creation.

Three types of mutual funds

1) Stock Fund

    Stock funds, also called equity funds, are the most volatile of the three, with their value sometimes rising and falling sharply over a short period. But historically stocks have performed better over the long term than other types of investments. That’s because stocks are traded on the expectation that a company’s future results will include expanded market share, greater revenues and higher profits. All of that would increase shareholder value.

   Generally stocks fluctuate because of investors’ assessment of economic conditions and their likely impact on corporate earnings. Socially responsible investors also factor in other risks to earnings such as exposure to fines or lawsuits from polluting the economy or discriminating against particular employees. 

2) Bond Fund

     Bond funds, also known as fixed income, invest in corporate and government debt with the purpose of providing income through dividend payments. Bond funds are often included in a portfolio to boost an investor’s total return, by providing steady income when stock funds lose value.

     Just as stock funds can be organized by sector, so too bond funds can be categorized. They can range in risk from low, such as a U.S.-backed Treasury bond, to very risky in the form of high-yield or junk bonds, which have a lower credit rating than investment-grade corporate bonds. Though usually safer than stock funds, bond funds face their own risks including:

• The possibility that the issuer of the bonds, such as companies or municipalities, may fail to pay back their debts.
• The chance that interest rates will rise, which causes the value of the bonds to decline
• The possibility a bond will be paid off early. When that happens within bond funds there is the chance the manager may not be able to reinvest the proceeds in something else that pays as high a return. 

3) Money Market Fund

    Money market funds have relatively low risks, compared to other mutual funds and most other investments. By law, they are limited to investing only in specific high-quality, short-term investments issued by the U.S. government, U.S. corporations, and state and local governments.

    Money market funds try to keep their “net asset value” (NAV), which represents the value of one share in a fund at a constant $1 per share. But the NAV may fall below $1 if the fund's investments perform poorly. Historically the returns for money market funds have been lower than for either bond or stock funds, leaving them vulnerable to rising inflation. In other words, if a money market fund paid a guaranteed rate of 3 percent, but over the investment period inflation rose by 4 percent, the value of the investor’s money would have been eroded by that 1 percent.

What is mutual fund ?

A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.

History: The first mutual funds were established in Europe. One researcher credits a Dutch merchant with creating the first mutual fund in 1774.The first mutual fund outside the Netherlands was the Foreign & Colonial Government Trust, which was established in London in 1868. It is now the Foreign & Colonial Investment Trust and trades on the London stock exchange. Mutual funds were introduced into the United States in the 1890s. They became popular during the 1920s. These early funds were generally of the closed-end type with a fixed number of shares which often traded at prices above the value of the portfolio. The first open-end mutual fund with redeemable shares was established on March 21, 1924. This fund, the Massachusetts Investors Trust, is now part of the MFS family of funds. However, closed-end funds remained more popular than open-end funds throughout the 1920s. By 1929, open-end funds accounted for only 5% of the industry's $27 billion in total assets.

After the stock market crash of 1929, Congress passed a series of acts regulating the securities markets in general and mutual funds in particular. The Securities Act of 1933 requires that all investments sold to the public, including mutual funds, be registered with the Securities and Exchange Commission and that they provide prospective investors with a prospectus that discloses essential facts about the investment. The Securities and Exchange Act of 1934 requires that issuers of securities, including mutual funds, report regularly to their investors; this act also created the Securities and Exchange Commission, which is the principal regulator of mutual funds. The Revenue Act of 1936 established guidelines for the taxation of mutual funds, while the Investment Company Act of 1940 governs their structure.

When confidence in the stock market returned in the 1950s, the mutual fund industry began to grow again. By 1970, there were approximately 360 funds with $48 billion in assets. The introduction of money market funds in the high interest rate environment of the late 1970s boosted industry growth dramatically. The first retail index fund, First Index Investment Trust, was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called the Vanguard 500 Index Fund and is one of the world's largest mutual funds, with more than $100 billion in assets as of January 31, 2011.

Fund industry growth continued into the 1980s and 1990s, as a result of three factors: a bull market for both stocks and bonds, new product introductions (including tax-exempt bond, sector, international and target date funds) and wider distribution of fund shares.Among the new distribution channels were retirement plans. Mutual funds are now the preferred investment option in certain types of fast-growing retirement plans, specifically in 401(k) and other defined contribution plans and in individual retirement accounts (IRAs), all of which surged in popularity in the 1980s. Total mutual fund assets fell in 2008 as a result of the credit crisis of 2008. At the end of 2010, there were 7,581 mutual funds in the United States with combined assets of $11.8 trillion, according to the Investment Company Institute (ICI), a national trade association of investment companies in the United States. The ICI reports that worldwide mutual fund assets were $4.7 trillion on the same date. (from:wiki)