Buying Mutual Funds,Oiecs In Thailand

[JolyonB]

I would like my wife to invest some money in mutual funds, unit trusts OIEC's instead of buying a condo but I do not want a so called "Financial Advisor".

In the UK I can use low cost online investment platforms such as Fidelity or Hargeaves Lansdowne, where the commission is vastly discounted. Anyone know if the same sort of system is available here?

[gerry53]

One you may want to check out IF you are comfortable with equity markets is the K Star fund by Kasikorn Bank and their investment division K Asset management. You can walk into a branch and purchase with ease. As you know most markets have taken a hit this year for many reasons. This fund has a ,25% purchase fee and .25% withdrawal fee - not bad for a managed fund. If you have K Bank online you can monitor your account progress 5 days a week on their daily closing prices. The fund is invested mostly in energy, banking, chemical and food sector for diversification. (with some Miscellanious). I have confidence in the Thai and some Asia ecomonies compared to many in the western countries.

Published returns are 3 months = -2.6%, 6 months = -4.5%, 1 year = 30.4%, 3 year = 44.4%.

I throw in enough for my next years immigration requirement and have gotten 7% automatic redemptions already this year ( I purchased on a dip in the NAV price).

I am not saying to buy it it was just one I found comfortable and convenient, I watch my own stock market investments on a daily basis I don't want to do it here also. I put in the link if you are interested. Good luck.

http://www.kasikornasset.com/en/pages/K-STAR.aspx

[aurelius]

Basically all the major banks offer a similar service. Check out their websites (or Morningstar) for performance and fund info and then go to a branch of the bank which sells the funds you are interested in - its convenient if the bank and the asset management company are the same "group" - i.e. KBank + Kasset, BBL + BBLAM, SCB + SCBAM, and then you can link up your mutual fund with the bank's internet banking service and trade / monitor your funds easily. Many funds have no specific trading charges and no tax on capital gains, and most AM's offer a full range of products from low risk money market to equities and derivatives. Generally they require a branch visit to open each fund in the first instance.

[jbaldwin]

Basically all the major banks offer a similar service. Check out their websites (or Morningstar) for performance and fund info and then go to a branch of the bank which sells the funds you are interested in - its convenient if the bank and the asset management company are the same "group" - i.e. KBank + Kasset, BBL + BBLAM, SCB + SCBAM, and then you can link up your mutual fund with the bank's internet banking service and trade / monitor your funds easily. Many funds have no specific trading charges and no tax on capital gains, and most AM's offer a full range of products from low risk money market to equities and derivatives. Generally they require a branch visit to open each fund in the first instance.

Absolutely correct 80% of funds under management in the Thai mutual fund business is with the assets management arms of the four big banks. Only a few small independent firms - Aberdeen being the most prominent. There is no common platform.

[JSixpack]

Basically all the major banks offer a similar service. . . . you can link up your mutual fund with the bank's internet banking service and trade / monitor your funds easily. Many funds have no specific trading charges and no tax on capital gains

Can't find a quick answer about capital gains tax on Thai security investments. (I understand there's 15% on dividend income, right?) Is the above correct re: no tax on capital gains on bank mutual funds? (Not talking about long-term retirement funds.)

What about plain ol' securities. I buy shares of Siam Concrete, price doubles in two years, I sell: how much if any capital gains tax do I pay? Does the securities firm report the gain?

Edited March 5, 2012 by JSixpack

[chiangmaibruce]

OP: The answer to your question - are their discount brokers of Thai mutual funds - is I believe - No. As a consequence you will generally have to pay an entry or buy-in fee (in addition to other fees). An alternative is a listed property fund where you will just pay a fairly minimal commission.

If you do a Thaivisa forum search (see top right this page) on both "mutual funds" and "property funds" you should be able to locate some useful and informative prior threads on both.

[chiangmaibruce]

Can't find a quick answer about capital gains tax on Thai security investments. (I understand there's 15% on dividend income, right?) Is the above correct re: no tax on capital gains on bank mutual funds? (Not talking about long-term retirement funds.)

What about plain ol' securities. I buy shares of Siam Concrete, price doubles in two years, I sell: how much if any capital gains tax do I pay? Does the securities firm report the gain?

1. It's 10% (withholding tax) not 15% on direct shares and mutual fund holdings, but note the following ... "Taxpayer who resides in Thailand and receives dividends or shares of profits from a registered company or a mutual fund which tax has been withheld at source at the rate of 10 per cent, may opt to exclude such dividend from the assessable income when calculating [personal income tax]. However, in doing so, taxpayer will be unable to claim any refund or credit as mentioned in 2.4. " http://www.rd.go.th/...ish/6045.0.html

2. No capital gains tax on sale of shares/stocks

Edited March 5, 2012 by chiangmaibruce

[JSixpack]

Can't find a quick answer about capital gains tax on Thai security investments. (I understand there's 15% on dividend income, right?) Is the above correct re: no tax on capital gains on bank mutual funds? (Not talking about long-term retirement funds.)

What about plain ol' securities. I buy shares of Siam Concrete, price doubles in two years, I sell: how much if any capital gains tax do I pay? Does the securities firm report the gain?

1. It's 10% (withholding tax) not 15% on direct shares and mutual fund holdings, but note the following ... "Taxpayer who resides in Thailand and receives dividends or shares of profits from a registered company or a mutual fund which tax has been withheld at source at the rate of 10 per cent, may opt to exclude such dividend from the assessable income when calculating [personal income tax]. However, in doing so, taxpayer will be unable to claim any refund or credit as mentioned in 2.4. " http://www.rd.go.th/...ish/6045.0.html

2. No capital gains tax on sale of shares/stocks

Thank you! Never invested in shares here, now thinking about it.

[fletchsmile]

There are no online platforms comparable to discount brokers or fund supermarkets like Hargreaves Lansdown or Fidelity here in Thailand. The market is generally less mature and developed in terms of sophistication.

Generally initial fees here are lower than the gross initial fee in say UK. You can often find funds in Thailand that feed in to some of the global funds elsewhere in the world, but the range is more limited. Because the gross initial fees are generally lower, there's little room for discount brokers.

As an example:

Aberdeen Global Emerging Markets in the UK has a 4.75% initial charge if you go direct. Thru discount brokers like Hargreaves Lansdown in the UK as you're aware you can get that initial fee discounted to effectively zero. In Thailand, it has a slightly different name of Aberdeen Global Emerging Growth Fund and currently has a 1.5% initial charge. It feeds into the master fund in the UK. The Master Fund grants a rebate to ensure you're not double charged. So in summary:

UK no broker = 4.75% initial

UK Hargreaves Lansdown = 0 % initial

Thailand = 1.5%

Annual charges are similar on both, but not exactly the same. They also don't have Hargreaves Lansdown's annual rebate scheme to get back some of the annual / trailer fee that concept doesn't exist yet here.

When buying:

- A bank such as Standard Chartered has probably the largest range of fund management houses and funds. But their platform is poor and buying and selling is done by manual paperwork. Although if you're a Priority client they'll send messengers to your home, and you just sign the paperwork for each buy/sell. You can look at your holdings online as part of your internet banking.

- Banks such as BBL or SCB which have related party fund management arms and are better integrated and have better platforms to do online, but they don't have as wide a range. There's an obvious incentive to push their related party funds rather than the best in sector as a trade off for convenience

- Fund Management houses such as Aberdeen have platforms that allow you to buy/sell online but only from them

So horses for courses really.

There's been an increasing trend of feeder funds to overseas investments opening up in the last couple of years. eg gold funds linking into SPDR, oil funds, TMB linked into Franklin Templeton Global Bond Fund etc, and the choice has really opened up.

Yes. Capital gains on mutual funds are not normally taxable for individuals.

Dividend paying funds are a bit more messy. eg ING Big Cap Div LTF you can elect to have the div paid with no tax deducted, but should account for it on your tax return and pay at your marginal income rate (0-37%). Alternatively you can have a flat 10% deducted instead. My advice would be choose a comparable fund that doesn't pay divs (accumulation fund) and simply sell units when you want income, as that way it becomes a capital gain and as mentioned no tax. Strange but that's the way it works.

LTFs are excellent. Essentially unit trust/ mutual funds with a tax wrapper, allowing you to claim back tax relief at your marginal rate of tax (0-37%) on the lower of 15% of salary or 500k.

[JSixpack]

Tnx also, fletchsmile. Useful info for any TV member considering investments in LOS fund/share markets.

[Gaccha]

Any pointers for a very specific plan:

On both the serious stock collapses I missed out on buying in to the bottom of the market. The second time was because Fidelity said they had new ID checks making it impossible to even redeem funds already held, let alone buy new funds.

Finally, I have jumped all the loops at Fidelity only for them to declare Thailand is a restricted market and they cannot allow me to buy funds from my location in Thailand.

I want to be able to buy funds at a cheap entrance rate that are close copies of the funds I have now that I anticipate will collapse again when Greece exits the Euro. These funds include Eastern Europe, South America, China, Property Commerical UK and so on.

The funds mentioned above seem to have no discount on them or are Thailand-centred. Is there anything else out there...?

[AyG]

Why would the OP not want to use one of the UK platforms? Hargreaves Lansdown doesn't allow offshore clients, but Transact, Skandia and Cofunds certainly do. (Don't know about FundsNetwork.) Alternatively, use a platform specifically aimed at expats, such as Internaxx.

If the OP's intention is to gain exposure to the Thai stockmarket this can be done through unit trusts/OEICS such as Allianz Thailand, JF Thailand, Amundi Thailand or Fidelity Thailand, or the Aberdeen New Thai investment trust. (This investment trust is only available through Transact and Internaxx I believe.) Alternatively, if the platform supports the purchase of ETFs, then there's the iShares MSCI Thailand Index Fund ETF.

Indeed, if one's personal economic future is tied to a particular country, then it's prudent to bias one's investments towards that country's economy. However, one should remain diversified, which can't really be satisfactorily achieved using the fund offerings of any single Thai bank.

One also needs to be able readily to switch investments should the economy develop significant problems. Remember that the Tom Yang Gung crisis started in Thailand. Such switching can be done fast and more cheaply using one of the platforms mentioned above.

So, not going the Thai bank route wins heads down for me: more investment choice, lower costs, greater ease of switching investments. Oh, and any income is not taxable in Thailand.

Edited September 23, 2012 by AyG

[cheeryble]

To the OP

There is a reason banks and mutual companies offer funds. It's because they make money from you. They make money as you go in, as you stay in, and sometimes as you exit.

That would be OK if you got value for your money.

However it is well known that across the board mutual funds underperform simple direct investment. The fact is they have been proved incapable of making investment choices which beat the market as a whole. In fact the opposite. So why pay for this loss.....why not buy the underlying, or a reasonable proxy for it, with a whole lot less restrictions (oh yes, they're gonna charge you to get out "early") and "friction" (fees and even churnage, where they turn over stocks to make it look like they're don't something and even to enrich themselves by using their own brokerage and favoured buyers/sellers)?

Example if you want to follow the Thai market as a whole you can buy a US ETF fund (instantly tradeable with very low tracking fees) like TTF or TF in $, but they will essentially be ฿ assets so will follow ฿'s rise or fall. Or for direct ฿ investment you could just buy a handful of shares here in Thailand that tend to behave as the whole market does, or any part of the market you favour. You can do look at the components of the ETFs in question by going to their website or a finance website and simply copy them or partly do so with an easy handful of stocks. All the stocks in an ETF should be strong and liquid, so you don't even have to check that.

Cheeryble

Edited September 23, 2012 by cheeryble

[AyG]

However it is well known that across the board mutual funds underperform simple direct investment. The fact is they have been proved incapable of making investment choices which beat the market as a whole.

I think this is an oversimplification of the issue.

(1) Yes, the average fund manager under performs against the benchmark index - but not all fund managers are average. In most sectors there is a small handful of managers who have consistently beat the benchmark (even after fees) over prolonged periods - decades in some cases.

(2) Where the fund manager has flexibility of asset class (e.g. can switch between equities, gold, conventional bonds, index linked bonds and cash) and can make good judgement calls, he/she can act much more defensively than if tied to a single asset class. Funds such as Troy Trojan and Ruffer Total Return have both employed such flexibility to great effect over many years, as has the Personal Assets Trust investment trust. With a traditional ETF you remain exposed to a single sector/asset class come good or bad.

(3) ETFs in some sectors are very heavily weighted in favour of a single stock, so may not provide an appropriate level of diversification; a fund manager should be able to reduce the single-country risk.

(4) Not all ETFs are backed by the physical security, so there is a significant counterparty risk; other ETFs don't fully replicate the underlying index, so there is a risk of tracking error.

The decision between using a passive investment versus an actively managed one is one that requires careful consideration and isn't a case of "ETFs are always better".

[cheeryble]

However it is well known that across the board mutual funds underperform simple direct investment. The fact is they have been proved incapable of making investment choices which beat the market as a whole.

I think this is an oversimplification of the issue.

(1) Yes, the average fund manager under performs against the benchmark index - but not all fund managers are average. In most sectors there is a small handful of managers who have consistently beat the benchmark (even after fees) over prolonged periods - decades in some cases.

(2) Where the fund manager has flexibility of asset class (e.g. can switch between equities, gold, conventional bonds, index linked bonds and cash) and can make good judgement calls, he/she can act much more defensively than if tied to a single asset class. Funds such as Troy Trojan and Ruffer Total Return have both employed such flexibility to great effect over many years, as has the Personal Assets Trust investment trust. With a traditional ETF you remain exposed to a single sector/asset class come good or bad.

(3) ETFs in some sectors are very heavily weighted in favour of a single stock, so may not provide an appropriate level of diversification; a fund manager should be able to reduce the single-country risk.

(4) Not all ETFs are backed by the physical security, so there is a significant counterparty risk; other ETFs don't fully replicate the underlying index, so there is a risk of tracking error.

The decision between using a passive investment versus an actively managed one is one that requires careful consideration and isn't a case of "ETFs are always better".

.

Hello AyG thankyou for your comments.

To verify my non-oversimplifying character :-) I shall answer point by point:

1. A very few managers may outperform. The problem is knowing whether this is because they have an edge and will outperform in future or whether it's survivorship bias. In any case a possible advantage must be weighed against the cost and illiquidity. Betting on a manager is rather like betting on a stock. To choose to back one chosen manager is hardly diversification, which presumably you're warning about in your point 4.

2. Some truth in your point, the problem is moving asset classes may also put you in the wrong class. The manager's judgement call is just that, a judgement, and in making it he is essentially betting against those who don't make the same moves as him. He is considering himself cleverer which is OK if he is indeed cleverer and not falling under my point 1 of merely having done well so far be it luck or judgement and thereby surviving to say "I am better than others!" This of course always applies to a few people at a roulette wheel, until it doesn't. At least tracking a respectable index long term the graph will come in at the bottom left and go out at the top right with minimum expenses reducing one's pot.

3. May occasionally be true but non-diversification can be seen quite easily.

4. Sure I have heard GLD is built on sand, somehow doubt it's truth (hope so I own some)

As for not reasonably replicating a stock index, not normally the case as index trackers are designed to do just that, track, but in any case one may as likely outperform the index as underperform. If you don't want the very slight extra volatility, get something else or make your own portfolio.

As for your last comment

"The decision between using a passive investment versus an actively managed one is one that requires careful consideration and isn't a case of "ETFs are always better"

I naturally concur.

Just been presenting the other side of the coin.............sure constructive criticism is good criticism!

Cheeryble

Edited September 23, 2012 by cheeryble

[cheeryble]

AyG I shall just add:

To the best of my knowledge the entry fee to funds, often around 5%, is set aside not to strengthen the abilities of the fund, but for payment of the introducer/financial advisor/agent. Because of the setup even if you enter direct without an introduction you still pay......all to keep the referrers of business happy, because they are important to the fund. The fee will stay with referrers regardless of how the fund performs. A friend bought into a "completely safe" ground rents fund which had, like a few fund managers, been giving returns for quite some years (against my advice I might add). That fund went down the pan and my friend's equity went largely down the pan, but even what was left he couldn't withdraw without more fees, and the "introducer" already had his share in the bank.

Edited September 23, 2012 by cheeryble

[GreenSnapper]

Don't have your major assets in Thailand.

Check out fundsupermart in Singapore. Professional and cheap.

[steveromagnino]

Dear Jolyeon

I presume your wife is aware of the local LTF,RMF, and 'life insurance' saving schemes which are tax deductible up to 15% each of gross annual income (assuming she is a tax payer RMF LTF) and maximum of 100,000b per year ('life insurance') and so represent the easiest and best way to invest for Thai tax payers.

LTF is minimum of 5 calendar years investment (actually can get to 3 years and 3 days if you invest end of one year and withdraw on the 2nd day of the 5th year; big gain is the tax deduction (if she is earning more than about 40,000b a month then likely marginal tax rate is at least 15-20% and probably 30%) hence the 15% caps, currently most of the LTFs are up something around 10-20%+ in the last 12 months as they invest in Thai blue chip equities mostly (although there are other options with weightings in bonds and so forth).

RMF is withdrawable at age 55.

There is also 'life insurance' which I put in quotes because it is not really life insurance; it is a scheme where you pay (there are a few variations) 100,000b per year for 7 years, receive 5,000b back each year from years 2 - 12, then receive approx 780,000b at the end of year 12 also (this scheme I think is called 12/7 at a few banks). This is also tax deductible max 100,000b a year. Payout in the event of death prior but only what was originally put in (I think).

There is also another life insurance scheme which allows investment of up to 200,000b a year, and payments are made for 12 years, then you receive an income stream from age 55 to 85, this is a more typical LI product and only works out even taking into account the tax deduction if you live until at least about 75 thereafter she is in the money. Depends on health and all that.

So assuming say income of 100,000b a month, RMF/LTF and 12/7 takes care of 38,000b a month which is a pretty healthy chunk and the following year, she immediately gets a cheque back for 136,000b approx, so in effect, the govt is subsidising her savings; when you look at how RMF and LTF are performing, it's almost a no brainer (money invested in 2009/2010 are up about 70%+ now excluding the 30% tax benefit).

If she is not eligible or wants to invest more, you can set up an e-trade account in Hong Kong which would allow her to invest in the various etrade products in non Thai baht currencies, including (I think but haven't done it myself since I have other access to foreign funds) mutual funds and so on.

Regarding investing locally, given the massive tax benefits of RMF/LTF and 12/7 type schemes that is partly why salaried staff tend to invest in these ahead of mutual funds and so forth, any of the major banks do have other plans but without the tax benefits they start to look not so good by comparison.

[AyG]

To the best of my knowledge the entry fee to funds, often around 5%, is set aside not to strengthen the abilities of the fund, but for payment of the introducer/financial advisor/agent. Because of the setup even if you enter direct without an introduction you still pay...

Yes, you pay a steep initial commission (and I've seen up to 7.5%) if you use a financial adviser (though many financial advisers will rebate some or all of this commission) or buy direct from the fund management group. However, for many years now investors have been able to buy through platforms where the initial commission is dramatically reduced. I haven't paid more than 0.5% now for at least 10 years.

Regarding investing locally, given the massive tax benefits of RMF/LTF and 12/7 type schemes that is partly why salaried staff tend to invest in these ahead of mutual funds and so forth

All true. However, you should never the the "tax benefits" tail wag the "investment decision" donkey. One should also consider other factors such as diversification, charges, quality of the fund managers concerned, security of your investments including political risk ... and then consider diversification again.