THE APPLICATION OF ASSET ALLOCATION STRATEGY USING PANIN MUTUAL FUND PRODUCTS IN PERIOD OF INVESTMENT

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1 THE APPLICATION OF ASSET ALLOCATION STRATEGY USING PANIN MUTUAL FUND PRODUCTS IN PERIOD OF INVESTMENT By William Suryanto A Final Project in Partial Fulfillment of the Requirement for the Degree of Bachelor of Management Undergraduate Program of Management Study School of Business and Management Institut Teknologi Bandung

2 APPROVAL PAGE THE APPLICATION OF ASSET ALLOCATION STRATEGY USING PANIN MUTUAL FUND PRODUCTS IN PERIOD OF INVESTMENT By William Suryanto ID No: A Final Project in Partial Fulfillment of the Requirement for the Degree of Bachelor of Management Undergraduate Program of Management Study School of Business and Management Institut Teknologi Bandung August, 2010 Approved By Ir. Subiakto Soekarno, MBA NIP:

3 ABSTRACT Asset allocation is a strategy that aims to manage risk and return for an investment by controlling the portfolio based on their risk tolerance and investment horizon to achieve the individual goals. This strategy would be effective when the asset classes would not have a parallel return at the same time and how to apply the appropriate asset allocation strategy would be based on the investor s goals and then diversify between the class assets of the portfolio. During , the investment value in Indonesia is very volatile. The economic condition is not stable and difficult to predict due to gain benefits from the investment. As we know in October 2008, there is a global crisis that makes the investment value in Indonesia was dropped significantly however it starts to recover in April 2009 and grow rapidly. This uncertain situation will cause investor panic in investing their funds which was originally supposed to apply Buy Low, Sell High principle; however they are doing the opposite. In this research, the author would like to apply asset allocation strategy that combined with Buyand-Hold strategy and Rebalancing Process into the portfolio and comparing with the portfolio that invested in accordance with IDX performance. The performances that want to be measured are the risk adjusted return of each strategies and portfolios. Financial instrument that would be used and believed could beat the market is mutual fund products. The author chose mutual fund product from Panin securities which are Panin Dana Maksima as stock mutual fund and Panin Dana Utama Plus 1 and 2 as bond mutual fund because the performance of Panin mutual funds product has a good return for each year investment and the data could be got as the internship program in the last semester at SBM-ITB. The author would apply the asset allocation strategy in 3 categories of portfolio based on the risk tolerance profile. The categories of the portfolio are conservative, moderate, and aggressive with each composition of asset allocation. The result that compared is the number of Sharpe, Treynor, and Jensen Ratio. The methodology of the research is basically simple. First, gathering data and literature review for the topic, then the next step is finding the return, standard deviation, beta portfolio and Sharpe, Treynor, and Jensen Ratio for each types of portfolio. This calculation will be repeated with three different strategies which are asset allocation that combined with Buyand-Hold, Rebalancing Process, and investing in accordance with IDX. The result for this research is the best strategy to be applied by the investor is rebalancing process of 3 months period that generates the highest score of for its Sharpe, Treynor, and Jensen measurement. In monthly basis calculation, the best type of portfolio is the aggressive one which generates the highest number of for its Sharpe, for its Treynor, and 0.875% for its Jensen compared with other strategies and portfolios. However the result shown in yearly basis calculation is different for its portfolio, the best portfolio is shown by conservative portfolio. The worst investment strategy is investing the fund in accordance to IDX performance because the standard deviation and beta portfolio of those strategies has a significant impact for the risk adjusted return. In overall conclusion, asset allocation strategy performs better risk adjusted return performance compared with investing in line with IDX. The most effective strategy during is the asset allocation that combined with quarter rebalancing because by rebalancing the risk of portfolio will be reduced since the investor would not be panic in uncertain condition and they would be forced to apply Buy Low, Sell High principle during their investment

4 ABSTRAKSI Asset alokasi adalah strategi yang bertujuan untuk mengelola risiko dan hasil untuk investasi dengan mengendalikan portofolio berdasarkan toleransi risiko dan jangka waktu investasi untuk mencapai tujuan individu dari investor. Strategi ini akan efektif ketika kelas aset tidak akan menghasilkan laba paralel pada waktu yang sama dan bagaimana menerapkan strategi alokasi aset yang tepat akan didasarkan pada tujuan investor dan kemudian diversifikasi antara kelas aset portofolio. Selama , nilai investasi di Indonesia sangat fluktuatif. Kondisi ekonomi yang tidak stabil dan sulit untuk diprediksi guna mendapatkan keuntungan dari investasi. Seperti kita ketahui pada bulan Oktober 2008, ada krisis global yang membuat nilai investasi di Indonesia turun secara signifikan namun mulai pulih kembali pada bulan April 2009 dan berkembang pesat. Situasi ini pasti akan menyebabkan kepanikan investor dalam menginvestasikan dana mereka yang semula diharapkan untuk menerapkan prinsip "Beli Rendah, Jual Tinggi", namun mereka melakukan kebalikannya. Dalam penelitian ini, penulis ingin menerapkan strategi alokasi aset yang dikombinasikan dengan strategi Beli-dan-Tahan dan Proses rebalancing ke portofolio dan membandingkannya dengan portofolio yang diinvestasikan sesuai dengan kinerja BEI. Kinerja yang ingin diukur adalah disesuaikan resiko laba dari setiap strategi dan portofolio. Instrumen keuangan yang akan digunakan dan percaya bisa mengalahkan pasar adalah produk reksa dana. Penulis memilih produk reksa dana dari efek Panin yang Panin Dana Maksima sebagai reksa dana saham dan Panin Dana Utama Plus 1 dan 2 sebagai reksa dana obligasi karena kinerja produk reksa dana Panin memiliki pengembalian investasi yang baik untuk setiap tahun dan data dapat didapatkan sebagai program magang pada semester terakhir di SBM-ITB. Penulis akan menerapkan strategi alokasi aset dalam 3 kategori portofolio berdasarkan profil toleransi risiko. Kategori portofolio yang konservatif, moderat, dan agresif dengan komposisi masing-masing alokasi aset. Hasil yang dibandingkan adalah nilai Sharpe, Treynor, dan Jensen Rasio. Metodologi penelitian pada dasarnya sederhana. Pertama, pengumpulan data dan kajian literatur untuk topik tersebut, langkah selanjutnya adalah menghitung laba, deviasi standar, portofolio beta dan Sharpe, Treynor, dan Jensen Rasio untuk setiap jenis portofolio. Perhitungan ini akan diulang dengan tiga strategi yang berbeda yaitu alokasi aset yang dikombinasikan dengan Beli-dan-Tahan, proses rebalancing, dan investasi sesuai dengan BEI. Hasil penelitian ini adalah strategi terbaik untuk diterapkan oleh investor adalah proses rebalancing dengan periode 3 bulan yang menghasilkan nilai tertinggi untuk nilai Sharpe, Treynor, dan pengukuran Jensen. Dalam perhitungan secara bulanan, jenis portofolio terbaik adalah portfolio yang agresif yang menghasilkan jumlah tertinggi 0,3237 untuk nilai Sharpe, Treynor 0,0248, dan 0,875% untuk nilai Jensen dibandingkan dengan strategi dan portofolio lainnya. Namun hasil yang ditunjukkan pada perhitungan secara tahunan berbeda untuk portofolio, portofolio terbaik adalah ditunjukkan dengan portofolio konservatif dengan strategi

5 yang sama yaitu rebalancing 3 bulanan. Strategi investasi terburuk adalah dana investasi sesuai dengan kinerja BEI karena standar deviasi dan beta portofolio strategi tersebut memiliki dampak yang signifikan untuk disesuaikan kembali risiko. Pada kesimpulan akhir, strategi alokasi aset menghasilkan kinerja resiko dan laba dari portofolio yang lebih baik dibandingkan dengan investasi yang disesuaikan dengan BEI. Strategi yang paling efektif selama adalah alokasi aset yang dikombinasikan dengan rebalancing kuartal/ 3 bulanan karena dengan proses rebalancing, risiko portofolio akan berkurang karena investor tidak akan panik dalam kondisi investasi yang tidak pasti dan mereka akan dipaksa untuk menerapkan prinsip " Beli Rendah, Jual Tinggi " dalam portfolio investasinya.

6 FOREWORD Praise and thanksgiving to the Lord Jesus Christ, for blessing, grace, guidance and His custody so this paper can be completed. This paper stems from the author's interest to the asset allocation strategy in financial instrument. Author decided to make a research paper with the title "The Application of Asset Allocation Strategy using Panin Securities Mutual Fund Products from In the process of writing this paper the authors certainly have a variety of obstacles so that the realization of this paper is not apart from the assistance and support from various parties. To that end, the author wants to thank profusely to the parties involved in the writing of this report, either directly or indirectly, namely: 1. Mr. Ir. Subiakto Soekarno, MBA. as an academic mentor and adviser lecturer. Thank you for your guidance, suggestions, and advice during this internship program progress. Thank you also for science and knowledge that has been distributed to authors of the course is meant for authors. 2. Mr. Henry, as the manager of Panin Securities Bandung. Thank you for permission, insight, and advice given to the author so that authors have an insight for this research topic. 3. Mr. Dr. Adrian Teja, as a manager of equity at Bandung Panin Securities. Thank you for your insight, suggestions, advice, and the science of capital markets in Indonesia, which has already taught to the author. 4. Mr Dr. Reza A. Nasution., as chairman course of SBM-ITB who have arranged the procurement of internship study program. This internship program is helping the author on creating and providing data for this research topic. Thank you for all patience, suggestions, and advice that really helped the author to complete this report.

7 5. My parents, Mr. Henry Suryanto and Mrs. Lanny Suryanto who has provide facilities for the author to complete this research, giving guidance, and moral support for the author so this research paper could be done right on time. 6. My Sister, Ms. Liffie Suryanto who always support and encourage the author in solving the problems. 7. All of SBM-ITB 2010 students and my friends who always to support me during the process of completing this research. 8. Other parties whose name cannot be written down one by one, the author was very grateful and owes to them all a lot. Finally, the authors hope that this research paper could provide some benefits for those in needs and also to readers. Bandung, August 2010 William Suryanto

8 LIST OF CONTENTS ABSTRACT i FOREWORD...iii LIST OF CONTENTS v LIST OF FIGURES vii LIST OF TABLES viii CHAPTER 1. INTRODUCTION Background Problem Identification Scope Limitation The Importance of Problem Solving Report Outline... 4 CHAPTER II.THEORETICAL FOUNDATION..7 CHAPTER III. METHODOLOGY Problem Identification Literature Study Hypothesis Data collection Data Analysis First Step: Determine risk tolerance profile that would be applied Second Step: Assume the initial capital to be invested Third Step: Apply Buy and Hold principle Fourth Step: Apply Rebalancing Process strategy Fifth Step: calculate risk and return profile of IDX in Hypothesis testing Conclusion CHAPTER IV. DATA ANALYSIS Analysis of Risk Adjusted Return using Buy-and-Hold Strategy Analysis of Risk Adjusted Return using Rebalancing Strategy... 26

9 4.2.1 Analysis of Risk Adjusted Return using Quarterly Rebalancing Analysis of Risk Adjusted Return using Semiannual Rebalancing Strategy Analysis of Risk Adjusted Return using Annual Rebalancing Analysis of Risk Adjusted Return on IDX Performance Comparison the Risk Adjusted Return between Buy-and-Hold principle and IDX Performance Comparison of Risk Adjusted Return among Rebalancing process of 3 months, 6 months, and 12 months period Comparison of Risk Adjusted Return among Buy-and-Hold Strategy, Rebalancing Strategy, and IDX Performance CHAPTER V. CONCLUSION Conclusion Recommendation Recommendation for Investors and Fund Managers Recommendation for Further Research with Related Topic REFERENCES APPENDIX.45 Table NAV of Panin Mutual Funds Product Buy and Hold Strategy Rebalancing Process IDX Performance... 81