Fixed Income Fund Performance Dropped due to rebalancing of Action

Jakarta - Action profit taking or rebalancing by investors triggered decrease in the performance of fixed income funds lately. Foreign investors do the rebalancing that causes the weakening of bond prices with a tenor of 10 years and over, but the bond below 7 years of experience strengthening prices.

"Some foreign investors to sell long tenured bonds, to be moved into short-tenured bonds," said Eli Djurfanto, Head of Fixed Income First State Investments Indonesia in a press release on Friday (11/19/2010).

Eli predict, with quantitative easing 2 (QE2), which decided the U.S. government will increase the amount of flow of incoming funds from abroad. In effect, the bond yield will persist or even can also go down a few basis points more, but will not be far from the current position.

As is known, the U.S. Central Bank has established a policy QE2 through the addition of liquidity to U.S. $ 600 billion in 8 months. The policy was intended to increase liquidity in the market in the hope of the U.S. economy moving again that the recovery process has not been going according to plan.

He added that foreign ownership has exceeded 30% of government bonds will be risky for the bond market, especially when they make withdrawals of funds or like today when foreign investors do the rebalancing so that the high bond market volatility.

To anticipate this, mutual fund First State Indonesian Bond Fund (abbreviated as FSI Bond Fund) has set a relatively short duration of the portfolio (3.8 years), with most of the FSI Bond Fund portfolio is extremely short-tenured bonds. According to Eli, this is an attempt to reduce the volatility of the FSI Bond Fund as well as anticipation of interest rate hikes by Bank Indonesia in 2011.

Source : Detik Finance