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Kehati Lestari Mutual Fund

In support of the Blog Action Day 2007, I’m writing about a new mutual fund launched last July. That mutual fund is Reksa Dana Kehati Lestari. So, what is so special about this mutual fund? Well, the issue of this year’s Blog Action Day is about the environment. Reksa Dana Kehati Lestari is the first socially responsible mutual fund in Indonesia, focusing on the subject of environmental sustainability. It is co-managed by a local investment company, Bahana TCW Investment Management, and an environmental foundation, Yayasan Keanekaragaman Hayati (Kehati Foundation).

The Kehati Foundation is a non-profit fundraising entity, and its primary mission is to facilitate local organizations and build their capacity to benefit from the natural resources and at the same time conserve the natural biodiversities. The Kehati Lestari mutual fund enables individual and institutional investors to participate in philanthropic activities to benefit the foundation. Investors would be able to invest and donate simultaneously by allocating either their full investment, full return only, partial return only, or just the management fee, as streams of donations for the foundation as long as the fund remains invested. This investment structure is called a quasi-endowment fund, where investors still hold ownership to the investment principal. However, they can also opt to donate the entire principal in the full endowment scheme.

While the quasi-endowment structure may not be uncommon in the western world, a mutual fund is probably the better vehicle, if not the only vehicle, for a large number of Indonesian investors to invest and donate consecutively as the trust (the standard vehicle in the west) law is virtually non-existent at the moment. However, one may argue that the law of waqf (religious endowment) may undergo better progress and can substitute for the trust as the investment vehicle for this type of philanthropic need.

I think this innovative product is suitable for many investors who want to support the environmental cause in a long-term and sustainable way. Investors may increase their participation level and switch their investment allocation to more generous options as their overall net worth grows and their wish to leave a legacy present itself. Moreover, institutional investors may claim their good act of corporate social responsibility (CSR) by investing in this mutual fund.

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