Thai Fund Industry Ranked 3Rd In The World

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Thai fund industry ranked 3rd in the world
The Nation

BANGKOK: -- Thailand's asset management industry is voted the third best in the world, according to a global investor survey announced today by the Securities and Exchange Commission.

Thailand follows the US and South Korea. It scores well in terms on regulatory framework and tax structure and improvement in selling activities and intermediary role. Yet, Thailand still has to improve some areas, particularly the information disclosure.

Morningstar’s survey covers investors in 24 countries, ranked Thailand at the "B" level, putting it on par with the Netherlands, Singapore and Taiwan. This is chiefly thanks to tax incentives like capital gain tax waiver and tax deduction on investment in long-term mutual funds.This raised the scores in the regulatory and tax category above the average level. However, some limitations need to be addressed, like the ones on local funds’ overseas investment and the direct offering of overseas funds to Thai investors.

In the fee and expense category, the scores are higher than the average., as most funds do not levy fees on unit trust transactions.

In the disclosure category, Thailand wins a moderate score. Absent from Thai funds’ prospectus are trading cost, the names of fund managers and their experiences as well as investment data of the funds under the managers’ control.

Thailand scores the lowest points in the selling and intermediary category, though the 2013 result is better than the previous year. Most funds are now sold via bank branches, limiting access for some investors. Less than 20 per cent of mutual funds is sold through non-bank channels.

"The research reflects the continued development in the Thai asset management industry. There is still much to be done, though," said SEC Secretary-General Vorapol Socatiyanurak.


-- The Nation 2013-05-17

[Arkady]

Regulatory structure in theory maybe. But the size of it is Mickey Mouse; it is massively overstaffed with incompetent and often corrupt, front running staff; and it's effectively closed to foreign participation. That makes it totally uncompetitive as there is no free movement of experienced foreign fund managers for Thais to learn from and the industry can't get any mandates from foreign investors or manage anything outside Thailand. Foreign funds that are based here are operating illegally under the radar and thus remain small. They have to pretend the fund management is done in the Caymans or somewhere they actually have just a brass plate in an agent's office. Most the assets under legitimate management are boring Thai fixed income managed for a tiny fee. Enforcement of the magnificent regulatory structure is weak too, as it is for Thai securities companies. The SEC doesn't dare go after any big fish and anyway has no powers of prosecution, so has to rely on corrupt police to file charges with corrupt prosecutors. As a result you see a steady stream of disciplinary measures taken against marketing officers and dealers without connections for not switching off their mobile phones in the dealing room and that's about it. Yeah a great fund management industry in theory.

Edited May 17, 2013 by Arkady

[bitcoinbob]

that explains a lot, SET is up over 40% last year alone. Foreign money should be coming in cargo ships to participate. The thai fund industry should be on fire, and the beginnings of a hedge fund industry should be growing along with massive prop shops but nothing.

[Arkady]

that explains a lot, SET is up over 40% last year alone. Foreign money should be coming in cargo ships to participate. The thai fund industry should be on fire, and the beginnings of a hedge fund industry should be growing along with massive prop shops but nothing.

Of the assets under management of the local industry have grown as the market has risen but the SEC is not interested in licensing hedge funds which they perceive as too risky. They also still make it rather difficult to short Thai stocks onshore and it is done more by foreign prime brokers offshore. All the onshore listed futures and options, including even the SET 50 futures are too illiquid to trade in size. So there is hardly any way to hedge anyway. They opened up overseas equities investment by Thais but it is done in a very convoluted way through a Thai broker and proceeds have to be remitted back to Thailand, if not re-invested, and Thai tax implications are a bit complex. They don't let them openly send money out of the country to open an account with a foreign broker.

Hong Kong has always been open to all foreigners and Singapore and Malaysia have aggressive courted foreign fund managers to set up shop in recent years. They even want the small hedge fund start ups because some of them succeed and get big. All them employ at least a few locals and give them training and experience. Thai fund managers can only learn the business in the stultifying atmosphere of a bureaucratic Thai fund management firm and are useless to work anywhere else. The SEC won't even allow a foreigner to be a Chief Investment Officer. Only the foreign funds who are happy working in a grey area of the law will come to Thailand and that puts a cap on size. How could a foreign pension fund give a mandate to a Thai fund management house to manage US$500 million in Asia ex-Japan? Impossible. Hence this ranking is utterly meaningless because it compares apples with oranges and is just intended for cocktail party smoozing purposes.

Edited May 17, 2013 by Arkady

[whiteman]

ARKADY..

Nice well written reply thank you for this insite. I hope more read it.

[PCA]

sold my thai fund yesterday, might miss another spike but better having cash in the pocket than paper on the wall. If reason enough at a later time I reconsider but too many good nows now

[fletchsmile]

Regulatory structure in theory maybe. But the size of it is Mickey Mouse; it is massively overstaffed with incompetent and often corrupt, front running staff; and it's effectively closed to foreign participation. That makes it totally uncompetitive as there is no free movement of experienced foreign fund managers for Thais to learn from and the industry can't get any mandates from foreign investors or manage anything outside Thailand. Foreign funds that are based here are operating illegally under the radar and thus remain small. They have to pretend the fund management is done in the Caymans or somewhere they actually have just a brass plate in an agent's office. Most the assets under legitimate management are boring Thai fixed income managed for a tiny fee. Enforcement of the magnificent regulatory structure is weak too, as it is for Thai securities companies. The SEC doesn't dare go after any big fish and anyway has no powers of prosecution, so has to rely on corrupt police to file charges with corrupt prosecutors. As a result you see a steady stream of disciplinary measures taken against marketing officers and dealers without connections for not switching off their mobile phones in the dealing room and that's about it. Yeah a great fund management industry in theory.

As you highlight, Thailand is still protectionist in its employment practices. The difficulties for foreign fund managers are getting licenced and exams inThai. I think there needs a bit more balance added to your post:

The Thai fund management industry has made some good strides in the last decades or so, and while I hear some of your points, some are a bit outdated. Financial Sector Master Plan (FSMP) and now FSMP2 are helping open things up too.

A couple of other points:

- I know Thai fund managers who have worked overseas and come back to Thailand. So they gain the exposure to best practices and foreign fund managers there. International companies like Aberdeen also leverage off global and regional structures, in their business models. Cross training exists.

- You're right the fixed income element still dominates. But in latter years there's been good expansion into other asset classes, such as equity funds, and now commodity funds such as gold and oil, as well as property. So there you have the main core asset classes of FI, equity, commodities and property. There are also foreign funds and feeder funds. Feeder funds feed into good choice fund managers outside Thailand, this is common for KTAM and TMB, eg KTAM mining fund and KTAM resources fund, Tisco Oil fund, TMB gold. Fee structure is set up so you are not double charges. So there's much wider access to funds.

People can get a lot of info and stats on SEC website to support this.

http://www.sec.or.th/infocenter/report/Content_quarterly.jsp?categoryID=CAT0000283〈=en

- In your second post you say that SEC won't allow foreigners to be Chief Investment Officer. That's not true. Again they prefer Thais, and set their work permit regulations etc up to protect their market, but there are some foreign CIOs from time to time, eg James Marshall is currently Chief Investment Officer at Finansa.

http://www.finansa.com/corporate/index.php?option=com_content&task=view&id=15&Itemid=64

It's more common to employ foreigners at the higher levels such as MD and C-Level, due to limitations on work permits etc you hire at the highest level. These people are often mentors and coaches to younger Thais and fund managers. They also often came up thru the fund manager route themselves so drawn on that for coaching and managing.

- Foreigners can be fund managers but its rare, because of labour protectionist policies. But they are there, eg Jeremy King at SKFM/ previously inked to Seamico.

http://www.sec.or.th/infocenter/report/Content_0000000276.jsp?categoryID=CAT0000125〈=en

Summary for me:

I think the Thai fund management industry is generally OK, all things considered. Cheaper than Singapore too, with better tax concessions eg LTFs, also no capital gains for retail investors compared to say UK. I'd agree with you it's by no means 3rd in the world.

For most people it will meet their basic needs. I know you're a more experienced investor, so understand your wanted the higher levels of sophistication. As an experienced investor myself and having spent time with fund managers like Schroders, as well as investing in more sophisticated products, the things that are missing like liquid derivatives markets and more sophisticated funds are "nice to have" rather than essential for most people. It's not there yet, but for your average Joe, it goes a long way to fulfilling their basic needs.

For me the balance is somewhere between your post and the article. It's good but not that good. Certainly not 3rd in the world, but not the basket case you suggest either.

BTW I'd add, I do put my money where my mouth is. I invest using Thai fund management companies in Thailand for me and my family, and find them fine for the basics. I prefer to Singapore, where I also invest using fund management companies. Singapore is better regulated but charge much higher fees. I also use UK, which in my view beats both for choice and depth, but just loses out for me on tax. Haven't seen the original report they refer to but no way does Thailand rank above UK for fund management or related markets. I can only assume the metrics they measured are overly simple to make a nice survey .

So use Thailand for the basics - convenient while here - and spread money over other places too. "Don't put all eggs in one basket", and run "horses for courses"

Best Regards

Fletch

Edited May 18, 2013 by fletchsmile

[sas_cars]

Hi Guys, What's the best online platform to trade thai mutual funds/unit
trusts? I remember reading it somewhere but don't remember anymore. Can someone
tell me again. Thanks

[fletchsmile]

Hi Guys, What's the best online platform to trade thai mutual funds/unit

trusts? I remember reading it somewhere but don't remember anymore. Can someone

tell me again. Thanks

Depends on which funds you want to invest in in Thailand. I do it manually in Thailand via my bank, who just send a messenger. The advantage is I can invest in different funds from different fund managers. Fund managers generally only allow you to buy their funds if doing direct. As investing in funds is less critical for timing than trading say stocks, it makes little difference. Orders are priced per day for unit trusts in contrast to trading stocks which are real time.

eg Aberdeen have a reasonable platform to buy and sell, but you can only do their funds. You also need a local Thai bank account for settlement.

Fletch

[sas_cars]

Hi Guys, What's the best online platform to trade thai mutual funds/unit

trusts? I remember reading it somewhere but don't remember anymore. Can someone

tell me again. Thanks

Depends on which funds you want to invest in in Thailand. I do it manually in Thailand via my bank, who just send a messenger. The advantage is I can invest in different funds from different fund managers. Fund managers generally only allow you to buy their funds if doing direct. As investing in funds is less critical for timing than trading say stocks, it makes little difference. Orders are priced per day for unit trusts in contrast to trading stocks which are real time.

eg Aberdeen have a reasonable platform to buy and sell, but you can only do their funds. You also need a local Thai bank account for settlement.

Fletch

Thanks. Can we buy any type of funds from a bank such as Kasikorn bank? They can sell for all fund houses?

[ThailandInvestmentGuide]

This site will tell you about funds available via kbank

http://www.kasikornasset.com/EN/Pages/Default.aspx

[sas_cars]

Thanks. But they only advertise their own funds. I am looking something similar as per this http://www.fundsupermart.com.my/main/home/index.svdo

[fletchsmile]

Thanks. But they only advertise their own funds. I am looking something similar as per this http://www.fundsupermart.com.my/main/home/index.svdo

You don't really get funds supermarkets in Thailand that invest online and will discount funds.

Fund management houses only do their own funds online.

I raised this recently with my bank, they're not interested in online as they want the customer contact. So although they have one of the widest ranges in Thailand it's manual. For online it's generally provider by provider for their own funds. No discounts

Cheers

Fletch

[sas_cars]

Thanks. Just did some more research and found this broker http://www.phatradirect.com/en/ Seems to be trading for most of the fund houses

[BlackJack]

http://tools.morningstarthailand.com/th/fundquickrank/default.aspx?Site=th&LanguageId=en-TH

you can play around to find the best funds and what they invest in

open question: is the lowering of the interest rate responsible for the knee jerk reaction in the SET going down?

open question: will the spending of 3 trillion baht create a SET value increase?:

[BlackJack]

http://www.bangkokpost.com/business/news/352936/big-finnish-fund-shifts-from-thailand-to-vietnam