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View all search resultsAnalysis: Danantara’s hedge fund gamble
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(Courtesy of Danantara Indonesia)
D
anantara’s plan to appoint hedge fund managers marks a potentially significant shift toward a more complex and higher-risk investment strategy. The move comes even as the state asset fund has yet to publish financial reports substantiating President Prabowo Subianto’s claims of stellar performance. It raises a fundamental question: Is Danantara’s investment strategy aligned with its long-term national mandate, or is the fund experimenting with increasingly aggressive approaches to managing state assets?
Prabowo has repeatedly touted Danantara’s financial performance. In March, he claimed that Danantara’s return on assets had increased by 300 percent in fiscal year 2025. More recently, he said its revenue had increased by 400 percent. Growth of this magnitude is significant and warrants careful examination of how it was generated.
Such revenue growth would be encouraging if it reflected operational improvements and recurring dividends. However, a one-off spike could also result from accounting reclassification or consolidation. This distinction is particularly important because the forthcoming financial report will be Danantara’s first, leaving no comparable report from the previous year against which the figures can be assessed on a like-for-like basis.
These claims have yet to be substantiated by the publication of Danantara’s financial report. As of the first week of August, the report was still undergoing a pre-audit by the Supreme Audit Agency (BPK). Danantara’s chief operating officer explained that the lengthy process reflected the complexity of consolidating the financial statements of state-owned enterprises (SOEs) under Danantara, a process being undertaken for the first time. He said the financial report was expected to be available within one to two months.
The situation is further complicated by Danantara’s plan to hire hedge fund managers as early as next month. Danantara reportedly plans to appoint three or four managers, allocating US$500 million to each. The plan has sparked debate because hedge fund investments require careful consideration, particularly for an SWF that is increasingly accessing debt financing rather than relying solely on fiscal surpluses. Hedge funds have long been associated with relatively complex and higher-risk investment strategies.
Unlike mutual funds, hedge funds generally have higher barriers to entry. They typically require substantial minimum investments and may impose lock-up periods. These characteristics give hedge fund managers greater flexibility to pursue unconventional investment strategies, including short selling, leverage and statistical arbitrage. Such strategies can potentially generate returns even during market downturns. For an SWF, these strategies may appear attractive because they could serve as a shock absorber during periods of market turmoil and help smooth overall portfolio performance.
However, the unconventional strategies employed by hedge funds come at a substantial cost. They typically charge management fees as well as significant performance fees, with the latter averaging around 19 percent. Developing comparable capabilities in-house would also be costly, requiring specialized skills and expertise to generate above-market returns. Even with such expertise, there is no guarantee that these strategies will consistently outperform the market.
