Total assets under management (AUM) in Thailand’s mutual fund industry are expected to decrease by more than 10% because of lower asset valuations from the economic slowdown and outflows from long-term equity funds (LTF), says a veteran banker.

Thailand’s mutual fund industry registered total AUM of 5.4 trillion baht at year-end 2019.

Vasin Vanichvoranun, chairman of the Association of Investment Management Companies (AIMC) and executive vice-president at Kasikornbank, said the mutual fund industry has seen a sharp drop in stock and bond valuation as a result of the economic slowdown caused by the Covid-19 pandemic.

Return on investment of the Stock Exchange of Thailand index plummeted by almost 25% year-to-date as of Oct 30, with foreign net outflows tallying almost 300 billion baht.

Year-to-date net outflows in Thailand’s bond market were registered at 73.5 billion baht as of Nov 2, according to the Thai Bond Market Association.

The net asset value of mutual funds managed by local asset management firms saw a decline of 825 billion baht in the first quarter, with TMBAM Eastspring registering the biggest loss of 272 billion, according to the AIMC.

Four fixed income funds managed by TMBAM Eastspring ceased all transactions and operations amid heavy redemptions that nearly sparked a liquidity crunch for the mutual fund industry.

Net outflows from LTFs, which no longer receive tax deduction privileges, are expected to tally 10-20 billion baht per year, while the super savings fund, which is a substitute for tax-deductible investment in LTFs, with different investment conditions and lock-up period, is unlikely to entice investor interest, said Mr Vasin.

He said net inflows moving into the mutual fund industry during the past three years were slim compared with the period before as mutual fund products saturated the target investor group of 1.5 million people.

It is a challenge for the mutual fund industry to enlarge the investor base in the long run, said Mr Vasin.

“The industry has to consider a different strategy to reach a new investor group,” he said.

“Digital technology adoption, online services and structuring quality products with good returns are goals for asset management companies.”

Waratchaya Srimachand, deputy secretary-general of the Securities and Exchange Commission (SEC), said the mutual fund industry is still dominated by companies that are subsidiaries of large commercial banks, with a combined market share of 82%.

Fixed income securities make up the largest portion of the industry’s AUM at 51%, followed by equity at 21% and the rest are alternative investments and foreign investment funds.

“There are more than 1,500 funds offered by asset management firms, so investors have to study which one is ideal,” said Ms Waratchaya.

“The SEC hopes to see the number of fund advisory companies increase in the future to help investors compare investment performance.”

Source: Bangkok Post

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