How BPJAMSOSTEK (Indonesia's social security agency) Invests
in Indonesian equity
TLDR: you can read our threads post here
BPJAMSOSTEK is a social security agency in Indonesia. It provides a protection to the Indonesian workforce in the event of socioeconomic issues that happen. One of the products for the people who subscribe to BPJAMSOSTEK is JHT. This is an “account” that contains a fund for retirees. The amount depends on people’s monthly contribution and is usually proportional to the amount of salary that the person has.
But let’s say you earn a salary of IDR 5.000.000,- per month and you work for 10 years with 0 starting balance, your JHT would be estimated to be Rp 44.181.419,- (see image below).
Notice in the fine print on how the amount is calculated, it makes an assumption that there is a 5% annual growth to the fund.
That sounds reasonable enough because the risk free rate in Indonesia is estimated to be around 5-6%. However, at the backend it must be the case that the pot of money in the fund is invested somehow.
Indeed it is! The money is invested to a variety of investment instruments, including Indonesian equity.
How do they Invest in Indonesian Equity?
We can take a look at the information because the money is the public’s money. Yes, you put in that money with your labour. So there needs to be a great deal of transparency on how the money is being appropriated by the agency.
In fact, you can download the annual report of BPJAMSOSTEK in their website here.
So far (as of Oct 2023) I can only find the 2021 complete annual report. But it will be interesting to see the 2022 complete annual report as well perhaps in the future when they are ready.
According to the report, BPJAMSOSTEK has an Indonesian equity investment of around Rp 1.2 Trillion that is classified as Fair Value Through Other Comprehensive Income (FVOCI). These are the equity they intend to hold as they are classified to Other Comprehensive Income. In other words, they buy and hold.
What was their investment like at the end of 2021?
As of 2021 annual report, they invest in 22 equities in Indonesia as per shown below.
As you can see, their biggest investment (by quite a measure) is to Perusahaan Gas Negara also known as PGAS. They invested Rp 465 Bio worth at an average price of ~Rp 5.500,-. As the price of PGAS is around Rp 1.300 - 1.500. If the investment is still held, they are around ~70% floating loss or about Rp 350 Bio on this one equity alone.
Collectively as a portfolio, they are experiencing a floating loss of Rp 927 Bio as of 2021.
Investing in equity is hard. Even giants like BPJAMSOSTEK who definitely have access to the best investment intelligence (since they need to manage the public’s money) can experience a floating loss of a notable amount. This is because our investment thesis can be invalidated by so many factors:
Another reason for the observed performance might be attributed to the fact that BPJAMSOSTEK does not make necessary and timely adjustments (cut loss) to their non-performing investments. Based on a CNBC article, it seems that as of June 2021, BPK is emphasizing on the urgent need to have a clear cut loss framework. As this article from BPK website claims, the management does not take action for underperforming stocks for years.
What this tells us is simple. Being a giant risks the flexibility in making investment adjustments. This is diametrically opposite to retail investors out there. From time to time, if we observe that our investment thesis has been invalidated, we are free to make adjustments as we see fit.
Therefore, it is always meaningful to remember that retail investors are inherently gifted with a superpower that is the ability to be nimble to make adjustments to our investments where necessary. Let’s use that superpower to our advantage.