UOB Asset Management has completed its acquisition of a 75% stake in Jakarta-headquartered PG Asset Management (PGAM), according to a statement from the Singapore firm.
The completion of the transaction follows the firm’s announcement in November last year that it will be acquiring the Indonesian manager for S$2.25m ($1.62m), according to a statement at the time.
PGAM, which manages around IDR 355.4bn ($25m) in assets, has five mutual funds, which include equity, fixed income and mixed-asset products, according to the firm’s website. UOB plans to expand the product suite to include Islamic investments and smart beta products, according to a recent statement.
“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,” Thio Boon Kiat, the group CEO, said in the statement.
Small but growing market
Indonesia’s mutual fund market grew about 6% this year to IDR 536.9trn ($37bn), according to UOB.
Since 2013, the industry has nearly tripled, according to a report from the Otoritas Jasa Keuangan (OJK), Indonesia’s Financial Services Authority. However, it still lags Southeast Asian peers. Thailand’s fund industry has $134bn in assets and Malaysia’s has $97.7bn, according to data from Cerulli Associates.
But the potential is there. Indonesia’s mutual fund market is still under-penetrated, with only 0.3% of the country’s population invested in mutual funds, according to a report from OJK.
The number of investors has also continued to grow at 29% per year since 2014, the report said, noting that new investors mainly buy funds through the internet.
Digital distribution
As part of the acquisition, UOB plans to explore the use of technology to increase efficiency in product distribution, according to the statement.
Online digital distribution has gained traction in Indonesia. From January to July last year, around IDR 3.6trn in assets came from online channels, which compares to IDR 1.1trn in 2016, according to the OJK report.
With online distribution slowly becoming popular, 14 fund managers operating in Indonesia have launched their own platforms to directly sell to investors, according to the report. In total, there are around 45 digital platforms in Indonesia, which include those operated by distributors, such as banks and securities firms.
The growing popularity of online fund distribution, coupled with a huge population, prompted the entry of Australian robo-advisor Raiz into Indonesia. The robo firm secured a licence to distribute mutual funds in December. It plans to launch a robo-advisory platform by the third quarter and will use products from its mutual fund partner in Indonesia, Avrist Asset Management.
Market attraction
UOB AM joins a list of asset managers that have entered Indonesia.
In September last year, Korea-based Shinhan Financial Group, through its Indonesian subsidiary, Shinhan Sekuritas, acquired a 75% stake in Archipelago Asset Management, according to a Cerulli report.
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 into Indonesia.
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 eyes on Indonesia, with plans to hire more Singapore-based relationship managers focused on Indonesia’s high net worth individuals.
