ciptawarta.com – JAKARTA – The Federal Reserve (The Fed) has ended the period of high interest rates in the global market by cutting its benchmark interest rate by 50 basis points to 5.25%-5.50% in September 2024, marking the first rate cut since 2022.
Based on the Fed Dot Plot or The Fed’s projection document, it is estimated that there will be an additional 25 basis points cut in November and December this year. Previously, Bank Indonesia (BI) has also lowered its benchmark interest rate by 25 basis points at the Board of Governors Meeting in September 2024, and is expected to further lower interest rates by 50 to 75 basis points in line with expectations of future FFR cuts.
“With the predicted downward trend in interest rates continuing until the end of the year, which historically often serves as a positive catalyst for foreign capital inflows into Indonesia, this creates opportunities for risky assets in Indonesia,” said Insight Investments Fund Manager Lelly Susmiati in a statement, quoted on Thursday (31/10/2024).
Lelly explained that fixed income mutual funds with medium to long-term bond underlying are attractive instruments amid the trend of declining interest rates. This is due to the higher price sensitivity of long-term bonds to interest rate changes, making the potential for price increases more optimal compared to short-term bonds.
“In addition, the potential for foreign capital inflows into the Indonesian bond market can further increase the price of these bonds. Therefore, investors not only get coupon income, but also get attractive capital gains in the midst of declining interest rates,” explained Lelly.
Insight Investments has a fixed income mutual fund product with the majority of its underlying being medium to long-term government bonds, namely Insight Government Fund (I-Govt). I-Govt consistently outperforms its benchmark, both during periods of declining interest rates and when interest rates increase, with flexibility in applying the right duration strategy according to market conditions. Therefore, iGovt is suitable for investors who prioritize liquidity, good credit quality and have the potential for optimum returns during the upcoming period of declining interest rates.
As of September 30, 2024, the Insight Government Fund had a historical total return performance of 7.73%, outperforming the Infovesta Fixed Income Fund Index benchmark of 5.35% in the last 1 year. In order to take advantage of the downward trend in interest rates, the Insight Government Fund has the potential to increase returns from both capital gains and coupon income in the future.
What’s even more interesting, all of Insight Investments’ mutual fund products have a social contribution program, in line with the tagline Transforming Investments Into Social Impact. The Insight Government Fund has a social program that focuses on sustainable local economic empowerment, so that later on, SMEs who receive assistance will have independence in managing their communities and developing their businesses.
For example, the MATA (Skilled and Empowered Community) program with various activities, including perfume entrepreneurship training, makeup training, AC cleaning, and haircut entrepreneurship in the Jabodetabek area.
