(Aug 5): Indonesian sovereign wealth fund Danantara is preparing to farm out its first allocations to hedge fund managers later this year as part of efforts to diversify its portfolio.

The fledgling fund plans to start giving out money to hedge fund managers as early as next month or next quarter, and expects to set up a handful of separately managed accounts of at least US$250 million (RM1.02 billion) each, chief investment officer Pandu Sjahrir said in an interview in London.

“On average, I think US$500 million per manager,” he said. The fund will initially hand cash to three or four managers because “it is better to be concentrated”, he added. 

Officially known as Daya Anagata Nusantara, Danantara was established last year by President Prabowo Subianto in a bid to improve the management of state assets and channel capital into projects intended to accelerate growth in Southeast Asia’s largest economy. 

Sjahrir, a former tech investor and energy executive, leads the fund’s investment division, which sits alongside an operational arm responsible for consolidating hundreds of state-backed companies into national champions through a massive wave of restructuring. 

While Danantara has already forged relationships with asset managers, including General Atlantic, and is investing across asset classes including equities and fixed income, it is now looking to branch out to a range of alternatives. Sjahrir said liquidity would be a priority in its allocation decisions and that managers’ reputations would be central to the selection process.

“I do a lot of channel check with other sovereign wealth funds” when scrutinising potential general partners, he said. 

Danantara, which has said it oversees about US$1 trillion in assets across mostly state-owned companies, is also looking to open an office in Europe and expects to decide on the location of its first outpost on the continent within the next 12 months. 

The fund is also exploring opportunities for Danantara Sumberdaya Indonesia — a new unit established to oversee exports of key Indonesian commodities including palm oil, coal and ferroalloys — at the London Metal Exchange. The city’s commodity trading talent is a key draw, Sjahrir said. 

Sjahrir visited the UK last month as the fund examines opportunities in the country’s research and development sector in and around Oxford and Cambridge, as well as in artificial intelligence. Danantara is looking for higher yields from its investments after initially focusing more on real assets including infrastructure and property.

“We’ve been really underweight” on artificial intelligence, he said. “We may miss the ride this year, but I think it’s probably the right thing.”  

Danantara plans to deploy about 200 trillion rupiah (US$11 billion or RM46 billion) this year. So far, it’s “about 50% there”, Sjahrir said, describing its progress as “slightly behind schedule”. A long-awaited first public audit will likely be released in September or October.

Current projects of the fund include waste-to-energy investments in Indonesia and property in Mecca, Saudi Arabia, to serve Indonesian pilgrims. It is also examining investments in food security and critical minerals. 

Besides deploying capital internationally, Sjahrir is also seeking to position Indonesia as an investment hub, touting the country’s relative stability to financial firms that recently flocked to emerging financial hubs in Dubai and Abu Dhabi before being jolted by conflict in the Middle East.

“Capital always goes where they feel most secure,” Sjahrir said. “Big global capital allocators are saying now is the best time to invest in Indonesia. And to be far from the war, that’s a big opportunity for us.”

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