Jakarta. Indonesia’s Financial Services Authority (OJK) is preparing rules that would allow pension funds to invest overseas if domestic investment options are unavailable or fail to offer attractive returns.

OJK is drafting amendments to Regulation No. 27/2023 on pension fund operations, OJK Chief Executive for Insurance, Guarantee, and Pension Fund Supervision Ogi Prastomiyono said Friday.

The proposed policy would give pension fund managers an additional investment option while maintaining strict oversight, Ogi said.

“Why do we allow overseas investment? This is a precaution in case there are no alternatives domestically or they do not provide good returns,” Ogi said in Jakarta.

He said the OJK would impose specific requirements on overseas investments because investment management is a key area of concern in the pension fund industry, particularly in light of problems seen in the past.

“Therefore, investment supervision is a priority, including policies on where investments can be placed,” Ogi said.

The revised regulation will provide guidelines for pension fund investments in various instruments, including stocks, mutual funds, and government securities, he said.

Individual pension fund managers will remain responsible for investment decisions, provided they comply with OJK regulations.

The regulator already monitors pension fund investments through its PRIME system, which allows OJK to track where pension funds invest, their counterparties, and transaction prices.

“We can see where pension fund A invests, who the counterparty is, and the price,” Ogi said.

OJK also works with investment committees in developing Pension Fund Regulations, or PDPs, which govern investment policies at individual pension funds. The regulations could eventually include provisions governing overseas investments, subject to OJK rules, he said.

Keeping pension funds invested domestically

Despite considering overseas investments, OJK still wants pension funds to remain an important source of financing for Indonesia’s financial and capital markets.

Pension fund assets have reached about Rp1,699 trillion ($95 billion), making the industry a significant institutional investor, including in government bonds.

“Our hope, and that of the authorities, is that pension funds will remain a source of funding for our financial and capital markets,” Ogi said. “So don't go overseas yet. There is still enough room domestically.”

The proposed rules are expected to provide a framework for pension fund managers to diversify their investments while ensuring that participants' funds are managed prudently and remain subject to regulatory oversight.

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