Jiwasraya & Mutual Fund Industry

A corruption and money laundering case implicating state-owned PT Asuransi Jiwasraya will not severely hit Indonesia’s mutual fund industry despite the Attorney General’s Office (AGO) having named 13 asset management companies and a high-ranking official as suspects.

The AGO on Thursday accused the  13 companies of mismanaging or laundering the premium revenue collected by Jiwasraya from 2014 to 2018. They allegedly caused Rp 12.35 trillion (US$873.06 million) of state losses, or 73.46 percent of the total Rp 16.81 trillion in state losses as audited by the Supreme Audit Agency (BPK). Most of the implicated asset management companies issued a single investor mutual fund designed specifically for Jiwasraya.

Unlike typical mutual funds, a single investor mutual fund is only owned by one customer and is often used by institutional investors, such as insurers or pension funds, that have a specific strategy and certain needs in managing their fund. This product is managed separately from other products sold to the public. Should there be any orders to suspend or liquidate the product, the orders will only apply to that specific product.

Jiwasraya case would not significantly hit the mutual fund industry, as the 13 investment managers only account for 10 percent of the total assets under management (AUM) of the country’s mutual fund industry, which reached a total of Rp 466 trillion as of May.

The AGO has blocked mutual fund accounts related to Jiwasraya at the 13 companies and assured on Sunday that other accounts unrelated to the case were not frozen so that the investment managers could still run their business.

Jiwasraya is accused of mismanagement when it invested most of its premium revenue from the JS Saving Plan, one of the company’s insurance products, in pumped-and-dumped stocks. As a result, it failed to pay out Rp 16 trillion (US$1.1 billion) in matured policies due in February to its policyholders.