KONTAN.CO.ID – JAKARTA. A strong risk-off sentiment swept through global financial markets in May 2026, placing significant pressure on the performance of the mutual fund industry.
According to Infovesta data, money market mutual funds demonstrated resilience by still recording positive monthly returns of 0.27% (Month-on-Month/MoM) in May 2026. Cumulatively, their year-to-date (YtD) performance grew by 1.60% as of May 2026.
Fixed income mutual funds also saw a monthly increase of 0.22%. However, their year-to-date performance still showed a correction of 0.62%.
Conversely, the most significant pressure was felt by mixed mutual funds and equity mutual funds. Mixed mutual funds fell 5.13% monthly and weakened 8.71% YtD. Meanwhile, equity mutual funds recorded the deepest decline, correcting 10.22% in May and plummeting 17.66% since the beginning of the year.
Reza Fahmi Riawan, Senior Vice President Head of Retail, Product Research & Distribution at Henan Putihrai Asset Management (HPAM), explained that May’s mutual fund performance remained under pressure due to a combination of external and domestic factors that heightened investor caution.
According to Reza, globally, markets reacted to an unexpected rise in US Treasury yields, surpassing expectations as the prospect of a Fed rate cut was delayed. This situation fueled the strengthening of the US Dollar Index (DXY) and triggered significant capital outflow from emerging markets, including Indonesia.
“Domestically, the pressure was predominantly observed in risky assets, especially stocks. This was reflected in the Jakarta Composite Index (IHSG) correction, influenced by the weakening rupiah exchange rate, a decline in foreign investor risk appetite, and MSCI rebalancing, which sparked sell-off pressure on several large-capitalization stocks,” Reza told Kontan on Tuesday (June 2, 2026).
Furthermore, the market also closely monitored issues concerning trading liquidity, the free float levels of several issuers, and policy uncertainties in the commodity-based sector. These factors led to deeper corrections in equity mutual funds and mixed mutual funds, given their high exposure to the equity market.
Amidst these pressures, money market mutual funds continued to show remarkable resilience, bolstered by high domestic interest rates and the inherent stability of money market instruments.
Meanwhile, fixed income mutual funds experienced volatility due to movements in Government Bond (SUN) yields, though the pressure they faced was relatively more limited compared to equity instruments.
In light of the weakening rupiah and ongoing market volatility, Reza, as an investment manager, chose to focus on preserving portfolio quality and strengthening risk management.
For fixed income instruments, Reza implemented a more conservative duration management strategy, focusing on short-to-medium tenor bonds to mitigate the risk of rising yields and maintain Net Asset Value (NAV) stability.
“On fixed income instruments, we tend to apply a more conservative duration management strategy, focusing on short-to-medium tenors to mitigate the risk of rising yields and maintain NAV stability,” Reza stated.
Conversely, for equity portfolios, Reza adopted a more selective approach, prioritizing issuers with strong earnings visibility, healthy financial statements, solid cash flows, and a natural hedge against the weakening rupiah.
Reza identified export-oriented sectors, several commodity issuers, and companies with a dominant portion of their revenue denominated in US dollars as more attractive choices under current market conditions.
Additionally, the firm maintains an adequate level of cash and portfolio liquidity to ensure the flexibility for tactical rebalancing when asset valuations become attractive.
According to Reza, the primary focus currently is not on pursuing aggressive short-term returns, but rather on maintaining optimal risk-adjusted returns amidst persistent high market uncertainty.
Looking ahead to June 2026, Reza anticipates continued market volatility as investors await clearer directions in global monetary policy and a stabilization of foreign fund flows into emerging markets.
In terms of performance, money market mutual funds are still expected to record stable returns ranging from 0.25% to 0.35% per month, supported by high deposit rates and robust money market instruments.
Meanwhile, fixed income mutual funds have the potential to post returns of approximately 0.2% to 0.7%, provided Government Bond (SUN) yields begin to stabilize and pressure on the rupiah subsides.
As for equity and mixed mutual funds, opportunities for a technical rebound remain open, considering that domestic stock market valuations have reached historically more attractive levels. However, their movement will still be heavily influenced by foreign fund flows, the stability of the rupiah exchange rate, and developments in Fed policy.
In the short term, Reza believes that money market mutual funds and fixed income mutual funds remain attractive options for conservative to moderate investors, offering stability amidst high market volatility.
Nevertheless, for investors with a longer investment horizon, the sharp correction in equity mutual funds is beginning to present opportunities for gradual accumulation, particularly in products holding strong fundamental stock portfolios with significantly adjusted valuations.
“The more relevant strategy now is not to make an aggressive entry all at once, but rather to opt for staggered accumulation to reduce timing risk in a market still sensitive to global sentiment and exchange rate movements,” Reza concluded.
Summary
Global financial markets experienced significant volatility in May 2026, leading to downward pressure on equity and mixed mutual funds due to capital outflows and rising US Treasury yields. While these categories faced sharp year-to-date declines, money market and fixed income mutual funds demonstrated resilience by maintaining positive monthly returns. The current market downturn is largely attributed to a stronger US dollar, weakening domestic currency, and investor caution regarding global monetary policy.
Investment managers are prioritizing risk management by focusing on portfolio quality, conservative duration strategies, and selective equity investments in companies with strong fundamentals. While short-term uncertainty persists, analysts suggest that current stock valuations offer potential for a technical rebound. Investors are encouraged to avoid aggressive entry and instead utilize staggered accumulation to mitigate timing risks until market conditions stabilize.