The Central Bank of America, the Fed, signals the raise its benchmark interest rate and runs a tapering in 2023, and the investors start to take positions. This is due to concerns about the outflow of foreign funds from Indonesia money market.
Tapering is the policy of the American central bank to hold back bond purchases in response to the improving economy. This policy is usually followed by a policy of raising the benchmark interest rate in response to the improving US domestic economy. The increase in domestic interest rates may lead to foreign investors taking their funds back home as the move is more profitable with controlled risks.
This cessation of stimulus or tapering is nothing new. The Fed had issued a similar policy in 2013 which was carried out in stages until 2016. However, at that time this policy triggered economic turmoil such as the drop in the price of the IDX Composite (IHSG) in Indonesia.
This occurrence in the economic field during 2013 to 2016 is what made the Fed governor's speech in mid-June 2021 about the signal that tapering would be re-implemented caused a rift in the market. Many investors began to think about looking for investment instruments that could withstand the negative impact of the policy.
One of the investment instruments to be considered is the capital protected fund (RDT). Capital protected fund is a structured (unconventional) mutual fund that protects 100% of the investor's principal at maturity. Usually, investor funds will be invested into debt instruments (bonds).
Similar to investing in money market mutual funds, when investing a capital protected fund, you will be assisted by an experienced and professional investment manager that will manage your fund. The Investment Manager will ensure maximum asset performance by investing funds in low-risk instruments with maximum returns.
When investing in a capital protected fund, the invested funds are fully protected until maturity. This protection benefit will expire when you withdraw funds prior to the maturity date. Protected mutual fund has an investment period determined by the Investment Manager. In addition, this type of mutual fund has a special offer period and potential investors can only buy during that time.
As the tapering by The Fed is in plan, financial observers consider capital protected fund to be a promising option, as this instrument offers a suite of advantages over other instruments which can be riskier and more volatile.
Some points that can allow a peace of mind for capital protected fund investors are:
Inflow of foreign funds Despite economic fluctuations at the global and national levels, foreign capital inflows to domestic financial markets are still quite high. Bank Indonesia noted that until early June 2021 the inflow growth of foreign funds to Indonesia was still considered good in line with the improving domestic economy.
Improving bond market As a safe investment instrument, the majority of funds in capital protected funds will be invested by Investment Managers in A rating bonds. Currently, Government Securities or Indonesian Retail Bonds (ORI) are in high demand.
This strong Indonesia bond market helps to reduce the fears against the negative impact of the Fed's tapering. Currently, the real yield on the Indonesian bond market is higher compared to 2013. Therefore, the performance of capital protected fund has a positive potential due to the contribution of bond coupons which are still very attractive in Indonesia.
Capital protected fund with a bond basis offers measurable returns with relatively small risk as long as investors can invest for a minimum of 2 years. This is because bonds in capital protected funds still provide periodic coupons.
Controlled Inflation Compared to 2013, the current liquidity condition of the Indonesian financial market still provides room for Bank Indonesia (BI) to issue a looser monetary policy. Inflation throughout 2021 is relatively under control at plus minus 3 percent or below the government's maximum target.
Low inflation has made capital protected funds attractive to investors. Especially when compared to other fixed rate instruments such as the money market with lower yields.
The ability to ward off the possibility of the tapering policy from The Fed makes this capital protected fund investment worthy of consideration. You can gain the maximum benefits of mutual fund investment. The protection and 100% guaranteed capital return serve as an advantage of capital protected fund.
In addition to warding off volatile economy situation, investing in capital protected funds is even more feasible because it offers convenience and practicality. You don't have to worry about risk and manage your fund, as you will be assisted by an experienced investment manager who can minimize the risk of loss.
Investment managers will usually apply passive management strategies so that they can avoid capital loss. In addition, they also diversify the investment allocations to secure the asset values. So you have the opportunity to get maximum mutual fund returns.
The large role of the investment manager behind the mutual fund management makes it necessary to choose a reliable and trusted investment manager. You can entrust your funds by investing in capital protected fund through DBS Treasures. DBS Treasures is a priority service for DBS Bank customers with a minimum total asset of IDR 500 million.
As a priority customer, DBS Treasures will help you plan your financial strategy confidently. You will be supported by a team of experts with the right experience and skills in investment asset placement. You can also get updated information on local and global economic developments on a regular basis through the wealth feed channel.
For capital protected fund investment, DBS Treasures will also provide many conveniences for you. You will experience various mutual fund benefits, including:
Invest in trusted assets The capital protected fund available at DBS Treasures is managed by a reputable and experienced Investment Manager. Your assets will be invested in safe instruments with good investment ratings.
Guide to wise investment Not only managing assets, DBS Treasures will also provide you with investment insight. A team of experts is ready to share information about the latest market and economic developments. They are also open to providing advice and guidance to support your investment journey.
Regular coupons for payment By investing in capital protected fund assets, you will get a coupon payment schedule. DBS Treasures will transparently inform you of the schedule.
Investing in capital protected fund through DBS Treasures can be the right choice. With the support of continuous digital innovation for all transaction needs through the digibank by DBS app, you will gain more and experience maximum benefits. You can take advantage of the 24/7 digital banking services for all transactions.
Investing in capital protected fund through DBS Treasures also provides an opportunity to better plan your finances. You can prepare medium-term or long-term plans according to your needs. You have the potential to earn higher returns compared to traditional banking products.
Plan your financial aspirations through capital protected fund as an investment option that frees you from having to worry about economic volatility.
