8 Tips to Choose a Trustworthy Investment Manager and Avoid Scams

When you invest in mutual funds, your returns are closely tied to the performance of your investment manager. This manager is responsible for making decisions on how your money is allocated and grown over time.

Their main role is to decide which stocks, bonds, money market instruments, or deposits to buy or sell. To make your investment work optimally, you need to be very selective when choosing an investment manager.

What Is an Investment Manager?

An investment manager is a licensed party whose main business activity is managing a portfolio of securities on behalf of clients. This excludes insurance companies, pension funds, and banks whose activities are regulated under their own laws.

The party allowed to operate as an investment manager must be a securities company that has obtained a business license from the Financial Services Authority (OJK).

Main Responsibilities of an Investment Manager

1. Managing Investor Assets

The investment manager’s primary responsibility is to manage the assets or funds entrusted by investors. Once they receive funds, they will allocate the money into various financial instruments according to the type of mutual fund chosen by the investor.

Common types of mutual funds include:

• Fixed-income mutual funds
• Equity mutual funds
• Mixed mutual funds
• Money market mutual funds

2. Selecting and Divesting Instruments

An investment manager has the authority to decide which instruments to buy or sell, without needing to get prior approval from each investor.

Every decision should be based on data and thorough analysis. The same principle applies when the manager decides to sell certain instruments.

3. Reporting Investment Results

The manager’s job is not limited to collecting funds and trading financial instruments. They are also responsible for preparing and providing reports on investment performance.

These reports are accessible to investors, so you can monitor how your funds are being managed.

Why You Must Be Selective When Choosing an Investment Manager

The investment manager plays a crucial role in growing your funds. Their skills directly influence the performance of your mutual fund portfolio, whether in bonds, stocks, or money market instruments.

In short, the success or failure of your mutual fund investment largely depends on the expertise and integrity of your chosen manager.

Tips to Choose the Right Investment Manager

To find a reliable and responsible investment manager, you need to be critical and selective. Here are some key things to check:

1. Check Legal Status and OJK License

Always verify the legality and licensing of the investment manager. You can check the list of licensed investment managers at: www.reksadana.ojk.go.id

This helps you understand their credentials and avoid illegal or unlicensed operators.

2. Review Their Experience and Track Record

Don’t just stop at legality. You also need to review their experience. You can examine the manager’s track record in managing investment products. This information is generally available in the mutual fund’s prospectus and fund fact sheet.

A solid track record reflects consistent and responsible fund management.

3. Evaluate Past Performance

Every investment manager leaves a clear history of performance.

Study how the mutual funds under their management have performed over time. You can find this information in:

• Fund fact sheets
• Performance charts
• Prospectus documents

This will help you gauge how well they manage risk and returns.

4. Look at Total Assets Under Management (AUM)

The total funds managed by an investment manager can be one of your considerations.

• A larger AUM often indicates strong market trust.
• However, a manager with smaller AUM can still be very competent and deliver excellent performance.

So, use AUM as one factor, but don’t rely on it alone.

5. Understand All Fees Involved

Before investing, make sure you clearly understand all fees and charges.

You can find this information in the mutual fund’s prospectus and fund fact sheet, such as:

• Management fees
• Subscription/redemption fees (if any)

Fee transparency is very important. Choose an investment manager who charges reasonable and clearly explained fees.

6. Don’t Believe Guaranteed Returns

In mutual funds, an investment manager must not guarantee any returns. Mutual funds are simply investment vehicles that pool funds from the public, which are then invested in various instruments such as bonds, stocks, and deposits.

If someone promises fixed or guaranteed returns, this is a huge red flag.

7. Always Cross-Check Information

With the rise of fraud and fake investments, it is essential to cross-check all information.

Be wary of:

• Fake licenses
• Exaggerated AUM
• Unrealistic performance claims

Always verify the data on:

• The official website of the manager
• The OJK website or other official financial regulators

If the data matches, it’s a good sign. If not, walk away.

8. Check Performance Consistency

Lastly, review the consistency of the manager’s performance, not just one-time results.

A good investment manager should be able to show:

• Stable or gradually improving performance over time
• Reasonable returns relative to the level of risk

If their performance is very volatile or only good in certain short periods, you may want to reconsider your choice.

By following these tips, you can minimize the risk of fraud and increase your chances of choosing a professional, trustworthy investment manager.

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