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Indonesia’s private wealth forecast to rise

Indonesia's affluent population is forecast to grow annually around 8%, and foreign firms have been moving in.

Between 2018 and 2022, the number of high net worth (HNW) investors in the country is expected to rise at an average annual growth rate (AAGR) of 7.7%, according to a recent report from Global Data.

“Growth is set to be particularly pronounced in the higher wealth bands, with the number of investors with liquid assets of $3m to $10m and above $10m forecast to grow at AAGRs of 10.1% and 9.3% respectively,” the report said.

“Looking forward, mass affluent numbers are also forecast to show steady and continued growth at an AAGR of 7.3% over 2018 to 2022,” the report added.

However, the growth is coming from a low base. In 2018, the affluent population (HNWs and mass affluent individuals), accounted for only 0.71% of adults in the country while HNW investors alone accounted for 0.02% of the total adult population.

HNW investors hold the majority (89.9%) of their investments in liquid assets such as equities, mutual funds, deposits, and bonds.

“However, wealth managers must remain aware of the slowly increasing investments in illiquid assets, with their proportion expected to rise over the coming years,” the report said.

Moreover, in 2018, about one-quarter of HNW assets were invested offshore, driven by tax policies. HNW individuals prefer Singapore as their major booking center, followed by mainland China and Hong Kong, the report said.

HNW investors prefer offshore bonds, which accounted for 36% of this group’s total offshore investments in 2018.

Retail investor

Indonesia’s retail savings and investments market has been growing at a constant pace and this trend is expected to continue over the next five years.

Overall, the value of the market tripled to $326bn in 2018 from $108bn in 2008. It is expected to cross the $400bn mark in 2022, the report noted.

“Deposits remain the preferred investment avenue among Indonesian retail investors, accounting for 66.8% of the total liquid retail savings and investments in 2018. This is partially due to retail investors’ limited knowledge about other investment types,” the report said.

Foreign players increasing

Sensing the the opportunity, foreign firms and banks have been setting up in Indonesia. In September this year, Singapore-based UOB Asset Management (UOB AM) completed its acquisition of a 75% stake in Jakarta-headquartered PG Asset Management (PGAM).

“We see immense potential in Indonesia’s asset management industry, driven by its economic development, increasing affluence and rising demand from individuals and institutions for investment solutions to protect and to grow their assets,” said Thio Boon Kiat, PGAM CEO, FSA previously reported.

In September last year, Korea-based Shinhan Financial Group, through its Indonesian subsidiary, Shinhan Sekuritas, acquired a 75% stake in local firm Archipelago Asset Management, according to a report from Cerulli.

Other foreign managers operating in Indonesia include Eastspring Investments, Manulife Asset Management, BNP Paribas Asset Management, Schroders and Malaysia-headquartered RHB Asset Management.

Global wealth managers have also moved in.

In April last year, Lombard Odier formed a strategic partnership with Bank Mandiri to develop its private banking arm through investment and family services. In 2017, Singapore-based OCBC launched an onshore private banking business.

Pictet Wealth Management has also set its sights on Indonesia, with plans to hire more Singapore-based relationship managers focused on Indonesia’s HNW individuals.

Part of the Mark Allen Group.