OJK Allows Pension Funds to Invest in Overseas Markets

The Financial Services Authority (“OJK”) is finalizing the drafting of a proposed OJK Regulation (“RPOJK”) on the Amendment to OJK Regulation No. 27 of 2023 on the Organization of Pension Fund Business. Ogi Prastomiyono, OJK’s Chief Executive for Pension Funds, Insurance, and Supervision of Guarantee Institutions (PPDP), explained that the draft regulation will refine the provisions governing Post-Employment Compensation Funds (Dana Kompensasi Pascakerja - “DKPK”) administered by Financial Institution Pension Funds (Dana Pensiun Lembaga Keuangan - “DPLK”), while establishing a legal basis for expanding pension fund investments into foreign financial instruments.

“In principle, the provisions governing DKPK are already set out in POJK 27/2023. However, the existing provisions remain general in nature and do not yet provide detailed rules on the administration of DKPK by DPLK,” Ogi stated.

Furthermore, the draft RPOJK also provides for the introduction of an option allowing pension funds to allocate a portion of their investment portfolios to foreign financial instruments. This policy has attracted the attention of legal practitioners and industry players, given that the pension fund investment framework has historically focused predominantly on the domestic market. However, OJK has emphasized that the expansion of investment opportunities into foreign markets is not based on the assumption that returns in the domestic market are suboptimal.

“The expansion of pension funds’ investment opportunities into foreign markets is expected to provide greater scope for portfolio diversification, thereby enabling investment management to be carried out more optimally,” he explained.