Indonesia pension fund to increase equity, fixed-income allocations

Jamsostek is preparing to put more money into stocks and bonds, betting the fast pace of economic growth in Southeast Asia will continue.

Jamsostek, or PT Jaminan Sosial Tenaga Kerja, will raise its holdings of consumer, construction and banking-related stocks that are poised to gain from greater middle-class and government infrastructure spending, President Director Elvyn Masassya said in an interview.

Jamsostek, located in Jakarta, Indonesia, will increase its corporate bond investments to seek better returns as yields on government notes fall toward a record low reached in February, Mr. Masassya said. The country’s largest pension fund, which allocated 33.1% of its 130 trillion rupiah ($13.5 billion) in assets in time deposits as of October, will lower the proportion to 28% next year, the minimum level allowed, he said. It will increase its holdings in stocks and bonds to the maximum ceiling of 22% and 48% respectively, he said.

“We are still predicting economic growth will be above 6% next year, probably around 6.3% to 6.4%,” Mr. Masassya said.

The pension fund will review its investment guidelines for the next five years in 2013 to further increase the maximum limits allowed into equity and debt, as well as raise the combined ceiling for property and direct investments to as much as 10% from 5% now, he said.

While he declined to name specific consumer, construction or financial-related stocks that Jamsostek will buy, the three industries are closely linked to the “main drivers” of the economy, Mr. Masassya said.

Jamsostek will increase its investments in corporate bonds to 35% of its fixed-income allocation, from 30%, Mr. Masassya said. Yields on local notes are expected to rise next year as the central bank begins tightening its monetary policy, he said.

“This year has been a party for issuers,” he said. “We will see more bargaining between issuers and investors next year as yields have reached their bottom this year.” The yield on Indonesia’s benchmark 10-year notes was 5.56% on Nov. 9, the lowest level since March 1, prices from the Inter Dealer Market Association show.

Jamsostek’s total assets under management will increase by as much as 20% next year from an estimated 132 trillion rupiah by the end of this year, he said.