London-based Ashmore has set up a presence in Indonesia with the hire of 11 staff locally and plans to add at least two more sales executives this year.

The investment team is five-strong, and Ashmore is in the process of hiring a few dedicated distribution staff to bolster the retail and institutional presence. Ronni Gandahusada is president director, supported by chief operating officer Eddy Hartanto and director Arief Cahyadi Wana.

The business has already launched its first two funds in February – a domestic all-cap and a small-cap product, and it will launch an Indonesian fixed income fund in the coming weeks.

“We can offer a full suite of investment products from Jakarta, both retail and institutional, and are beginning with funds that are most broadly applicable,” says Graeme Dell, London-based group finance director at Ashmore, who has been overseeing the Indonesia buildout.

“Mutual funds are the first to gain a track record,” he tells AsianInvestor. “From there we can manage money for local institutional clients in segregated mandates – or for offshore clients if they want dedicated exposure.”

But that will take time. The track record is only visible from February, and Dell says he doesn’t expect to see any real momentum in the Indonesia products until the end of 2013.

He admits that Indonesia is “underdeveloped” as a retail funds market, but that the authorities are keen to see it develop to a greater scale. The country's total fund assets under management stood at Rp188 trillion ($19.4 billion) on March 31.

Ashmore’s retail business will start with distribution through the local banks, and it is in discussion with domestic firms about creating partnerships. Indeed, they will be among the attendees at a launch event tomorrow so that they can meet the team and get more familiar with the business.

"We are continuing to build out the local business and expect the business to add scale once we can demonstrate a strong investment performance track record," says Dell. "In the retail space, there is huge potential as investors continue to increase their financial awareness."

Today, fewer than 1% of individuals own mutual funds, which has equated to total mutual fund assets representing only 3% of total bank deposits, he adds.

Still, Dell argues it is the right time to be getting in, something he feels is reflected by the growing presence of other foreign firms. They include Eastspring Investments, which gained a local licence last May, and Korea’s Mirae Asset, which acquired a 70% stake in domestic firm NISP Asset Management last year, but is not yet thought to have won approval to operate in the country.

Like Mirae Asset, Ashmore bought a majority share (85%) in a local fund house (along with the licence) and recapitalised it. The firm in question, Buana Megah Abadi, had been set up about two years before but had just one fund and a staff of three (who are no longer with Ashmore). The securities regulator, OJK, wants to see some of its “underused asset managers repurposed”, says a source.

A senior executive at a local asset manager is upbeat on foreign fund houses moving in, but notes that the new arrivals are creating greater competition for human resources.

“It’s good for the market to have more fund managers coming in. They should raise the quality [of the industry] and make asset managers provide better service to investors,” says the executive, adding that it won’t be easy for newcomers to build a business, given they will have to fight for talent and market share.

Ashmore Indonesia's own management team is an experienced one. Gandahusada was previously a director at Schroder Investment Management Indonesia since 1994.

Wana was previously finance director of Elang Mahkota Teknologi. Previously, he was head of equity research at Credit Suisse Securities Indonesia, and he worked at JP Morgan for eight years as an analyst.

Hartanto was director of operations at Deutsche Verdhana Indonesia and president commissioner of Deutsche Securities Indonesia from 2005 to 2012. Before that, he served as COO at JP Morgan Securities Indonesia from 1998 to 2004.