Indonesia's new sovereign fund will run with commercial mindset, official says

JAKARTA - New sovereign wealth fund Danantara Indonesia will focus on large-scale projects generating good returns as it prioritises sectors championed by the government to increase economic growth and create jobs, its chief investment officer told Reuters. Danantara, which was launched this week and is slated to eventually manage more than $900 billion worth of assets including government stakes in state firms, has been described by officials as Indonesia's version of Singapore's Temasek fund.
"All the money that goes to Danantara will be used commercially and productively to generate economic activities," chief investment officer Pandu Sjahrir told Reuters on Friday, adding the fund was not restricted to investing in state firms or projects.
President Prabowo Subianto has pledged $20 billion for Danantara's "first wave of investment" that will target projects in natural resources processing, artificial intelligence development, and energy and food security.
The initial capital will come from the government and dividend payments from the state company stakes that it will hold. In 2025, Jakarta has said it expects dividends from state-owned enterprises of 90 trillion rupiah ($5.4 billion).
"We will be deliberate, slow, and most likely be boring in our investment activities. Because our job really is to find good returns," Pandu said, noting risk management would be paramount given the public scrutiny the fund will face.
The government has pledged transparency, saying the fund could be audited anytime.
The company is still in a discovery stage for its cost of capital, Pandu said, and would be looking at projects with minimum acceptable rate of return close to those on Indonesian government bonds.
In its first year, Danantara will focus on domestic investment, including in private equity and debt markets, and will be open to offshore investment after that. Danantara's size means it will look to invest in projects worth $1 billion or more, with investment decisions based on the returns and the ability to create high-value jobs, he said. A number of investors have already approached Danantara for potential partnership, including large funds from the United States, Middle East, North Asia and Southeast Asia, Pandu said.
Unlike Jakarta's existing sovereign fund, the Indonesia Investment Authority, Danantara is not required to have partners for its investment projects, Pandu said.
Fitch Ratings said on Monday in its report the credit profile of some state-controlled firms could weaken if Danantara requires higher dividend payouts or if they were pursuing riskier projects as a result of Danantara's approach.

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