Equity Mutual Funds Lose Appeal as Investors Shift to Bonds
Main Takeaways
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JAKARTA, Investortrust.id — The net asset value of mutual funds in Indonesia has slowed sharply over the past four years, with average growth of less than 1% annually.
Fresh data from the Financial Services Authority showed equity mutual fund assets at Rp 69.84 trillion ($4.5 billion) in April 2025, down from Rp 76.56 trillion ($5 billion) in December 2024. The decline has become a major concern for market participants as it reflects a broad shift in investment behavior among both retail and institutional investors.
Hanif Mantiq, Chairman of the Indonesian Investment Managers Association (AMII) and President Director of PT Star Asset Management, said waning interest in equity funds stemmed from weaker returns. A decade ago, equity funds were the star of the market, generating double-digit returns, but the environment has changed.
“Equity funds do not match today’s market conditions. Returns are relatively small compared with other mutual fund products,” Hanif said during the Road to Investment Manager Award discussion hosted by Investortrust.id in Jakarta on Wednesday, Aug. 20, 2025.
Regulation and Insurance Industry Constraints
In addition to sluggish performance, new rules have also weighed on equity mutual funds. The Financial Services Authority Regulation (POJK) No. 5 of 2023 on the financial health of insurance and reinsurance companies restricts insurers’ flexibility to invest in equities.
“Unit-linked products can no longer directly buy equity funds. As a result, insurers have been redeeming their holdings and reallocating to discretionary funds,” Hanif explained.
Data from the Indonesian Life Insurance Association (AAJI) showed that the life insurance industry’s portfolio in equity mutual funds dropped 10.5% year-on-year, now accounting for just 12.2% or Rp 65.79 trillion ($4.3 billion). By contrast, government securities (SBN) have become the dominant instrument, with their share rising 12.9% to 39.6% or Rp 214.23 trillion ($14 billion).
Banks and Institutions Follow Suit
Hanif also noted a shift in the financial products offered by banks. Whereas equity mutual funds were once heavily promoted, banks are now more frequently selling bonds to their customers.
Large institutions, including BPJS Ketenagakerjaan, Taspen, Asabri, and Jiwasraya, have also trimmed their allocations in equity funds. “The lackluster returns have pushed institutions to scale back their exposure,” Hanif said.
Wawan Hendrayana, Vice President at PT Infovesta Utama, added that the performance of the Jakarta Composite Index (IHSG) over the past decade lagged behind time deposits and fixed income instruments when measured cumulatively. This, he said, has reinforced the appeal of more stable alternatives.
“Even for long-term investors, the 10-year historical performance has tilted preferences toward instruments that deliver consistent returns,” Wawan said.
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