BNI AM: 2024 will be the year of fixed income mutual funds

Senin, 18 Maret 2024

BNI AM: 2024 will be the year of fixed income mutual funds

JAKARTA, - Investment Director of BNI Asset Management (BNI AM) Putut Endro Andanawarih agrees that 2024 will be the year that fixed income mutual funds are able to provide the best level of return to investors.

"This year the big back drop is America, which has lowered interest rates, and there is an economic slowdown. "So if interest rates are lowered, Indonesia should also lower interest rates, so I think this is a positive catalyst for why bonds are attractive," said Putut to at the BNI Asset Management office, Jakarta, Thursday (14/3/2024).

According to the rule of thumb, interest rate movements are related to the rate of return that bonds can provide. Putut said that it was like a see-saw game, if interest rates fell, this would be followed by an increase in the rate of return on bonds, depending on the tenor. “The longer the tenor, the greater the level of return provided. Vice versa. "As interest rates rise, the rate of return on bonds will be depressed," he said.

However, Putut said that recently there have been anomalies or unnatural conditions in the level of return offered by bonds with medium and long term tenors. One of them can be seen in the one year to 3 year term bond coupon rate, offering a coupon of around 6.4%. Meanwhile, coupons for longer tenor bonds, such as 30 years, are not too different, still in the 6% range at 6.6% - 6.8%.

"You could say this condition is unnatural, the theory should be high risk - high return. "But conditions like this occur because they are triggered by Covid," he explained.

In fact, the opposite condition occurs in America, with 10 year tenor treasury bonds offering a coupon of 4.2%, while the one year tenor is higher at 5%. According to Putut, this step was taken by the US government as a form of incentive to encourage the public to invest in short-term bonds, because it is projected that interest rates will fall in the future.

"Conditions like this are good for fixed income, because interest rates will fall," he said.

In general, Putut believes that the signal that the trend of high interest rates will end will also provide positive sentiment for the global economy, which has been sluggish for the last two years.

This sentiment was marked by an increase in debt securities yields which triggered buying action on every SBN and ORI issuance as well as derivative investment instruments, one of which was Fixed Income Mutual Fund products.

Furthermore, Putut appealed to investors that the key to successful investing is portfolio diversification. As is often done by institutional investors such as pension funds, 20%-30% of the investment fund allocation is placed in equity (shares), while most of the rest is placed in fixed income, both long term and short term.

"Don't put it all on fixed income so it needs to be spread out, we will divide it up if we learn from good investors," said Putut.

Just for the record, the BNI-AM Ardhani Sharia Fixed Income Mutual Fund had a performance last year of 6.11%, this was thanks to AUM growth of 147% yoy in the last year (Feb 2023 – Feb 2024).

"Total funds managed by the BNI-AM Sharia Fixed Income Mutual Fund over the last 1 year (31 December 2023 to 28 February 2024) reached IDR 518 billion or grew by 147% compared to the end of February 2023. "This achievement is an achievement in itself amidst the sluggish mutual fund market at the beginning of 2024," concluded Putut.