Local Pension Fund Still Cautious Investing in Infrastructure?

JAKARTA (TheInsiderStories) – Local pension funds tend to be conservative despite the Indonesia Financial Services Authority (FSA) continues to expand the investment instruments options in the infrastructure sector.

Recently, FSA issued the regulation on infrastructure investment trust (InvITs) to encourage the investment manager to launch products that put at least 51 percent of infrastructure as portfolio. There are existing similar products such as private equity fund and asset-backed securitization that offer infrastructure as a main investment portfolio.

Three companies are also launched the infrastructure investment products lately. The one is PT Jasa Marga Tbk. (IDX: JSMR) that offers Rp2 trillion ($148 million) of asset-backed securitization product which toll-road revenue as the underlying asset with yield of 8-9 percent per annum.

The remainings are PT Bandarudara Internasional Jawa Barat (BIJB) that looking for Rp900 billion ($66,67 million) to partially fund of Kertajati Airport development in Cirebon, West Java and PT Perusahaan Listrik Negara (PLN) that need Rp9.9 trillion ($730 million) with account receivable of PT Indonesia Power Unit Bisnis Pembangkitan (UBP) Suralaya -a subsidiary of PLN- as underlying asset.

Executive Director of Indonesia Pension Fund Association Bambang Sri Muljadi said there are some reasons why pension fund managers tend to cautious to investing in infrastructure. But the point is the infrastructure based investment is riskier than other investment products such as deposit, bond, or money market based mutual fund.

However, Bambang admits that infrastructure-based investment offers the higher return in the long-term than existing pension funds portfolio of investment. But, the pension fund managers currently is focusing to enlarge investment portion in state bond to meet the 30 percent target as FSA rule. Therefore, other investments, including new-InVITs is not main instrument options for them.

However, Acting President Director of PT Mandiri Management Investment Endang Astharanti reveals that the investors are interested to invest in the three newest product that launched lately. Some pension fund managers, she said, invest in asset-backed securitization such as toll-road revenue by JMSR and receivable by PLN while private equity fund -fund raising to finance airport project that offered by BIJB- is ignored by them.

“Private equity fund is aggressive product because they invest to the company directly. No pension fund managers are investing in private equity fund currently despite insurance fund and individual investors see it as the opportunity,” she said.

Bambang Permadi Soemantri Brodjonegoro, Minister of National Development Planning said the low investment of pension fund on infrastructure because the fund managers move is limited by FSA regulation whereas asset under management of the pension fund in Indonesia is quite large.

According to FSA data, asset under management of pension fund in the first half of 2017 reached Rp245.29 trillion ($18,17 billion) with the return of investment of 3.6 percent. Most of the pension fund is poured to deposit (26.53 percent), state bond (23.09 percent), and corporate bond (19.73 percent) while the rest is invested in the mutual fund (5.94 percent), stock (3.17 percent), and others such as direct investment and saving.

“Pension funds are limited to 10 percent for direct investment which most of them to invest in property. They are still afraid to invest in infrastructure,” said Bambang.

Bambang hopes the FSA could relax the regulation while pension funds is more adventurous to invest in infrastructure due to the Indonesian Government plan to build massive infrastructure project that need at least Rp1,000 trillion ($74 billion). He expects the local pension funds could be participate with goverment plan due to some global big pension fund from Canada and Netherlands are trying to finance infrastructure projects in Indonesia. (CS/RF)