Set Index And Thai Mutual Funds

[seb2015]

A complement of information on the 2016 closure of LTFs

http://www.nationmultimedia.com/business/Extend-LTF-tax-break-AIMC-30232027.html

The overall amount invested via this vehicle seems huge.

Maybe we'll either see an extension of the subscription period or a progressive diminution of the tax benefit, as maybe half of the funds on the market would not be attractive at all if not for the tax incentive.

Sent from my iPhone using Thaivisa Connect Thailand

[David48]

Mate, I'm late to this Party.

15 pages of reading to catch up on.

Well, it has to be better then the General Forum.

My investment in the SET ... a paltry pool of Bt2.5 million, currently invested with 1/2 of that.

Been in and out over about 5 years now.

fletchsmile ... thanks for a great OP ...

.

[BlackJack]

Mate, I'm late to this Party.

15 pages of reading to catch up on.

Well, it has to be better then the General Forum.

My investment in the SET ... a paltry pool of Bt2.5 million, currently invested with 1/2 of that.

Been in and out over about 5 years now.

fletchsmile ... thanks for a great OP ...

.

is this thread dead now

I see K-MENA. K-India

Krugsri DIV fund

all paying very well

if your happy with 10% then cash in a be happy\

if youre in for the ride 30% plus no problems

single stock DEMCO

anything to do with infrastructure should do well

[fletchsmile]

is this thread dead now

I see K-MENA. K-India

Krugsri DIV fund

all paying very well

if your happy with 10% then cash in a be happy\

if youre in for the ride 30% plus no problems

single stock DEMCO

anything to do with infrastructure should do well

Hi Blackjack,

For me I went on holiday with the family to the UK in July for a while, then been trying to spend more time with the kids while they have been on holiday, and just been busy with a few other things. So cheers for the reminder

For investments, I've mainly been tinkering rather than anything major.

On the topics you mentioned, I'm becoming more interested in K-Banks and TMB AM fund ranges, when buying from Thailand. Both seemed to be continually adding feeders to overseas funds, which useful to increase the range in Thailand.

K-Bank are launching a property REIT. Plus as you say their MENA fund looks interesting, and I plan on following up with those

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

TMB AM seem to be adding stuff to, eg from their front page you can see they now have access to EM, US and World ETFs, in addition to Templeton's global bond fund, and gold and oil funds. It's funny for me to see some of these funds available in Thailand as the Templeton fund, and a similar i-Shares EM ETF I hold offshore

http://www.tmbam.co.th/v6/en/index.php

Definitely the range of investments is widening here.

Cheers

Fletch

[fletchsmile]

Some of the things I've added in Thailand in the last few months:

- I've been adding to my range of LTFs as usual for the tax breaks, the main difference by adding dividend funds rather than accumulation units: Krungrsi Div (you mentioned) and TMB Jumbo Div funds. The reason for div funds is to create more income streams so I can just collect money by doing less. There's a disadvantage of potentially suffering 10% flat tax or tax at your marginal rate on divs. As I'm earning at the moment I've elected for the flat 10%. So I lose 10% of say 3% - 4% (0.3% to 0.4%) on returns but cut down on the admin of bothering selling. Once I stop earning I'll switch to paying at Thai margingal rate of tax.

Also put some LTFs in the wife's name even though she doesn't pay tax. This is to create income streams for her she doesn't need to do anything with if I'm not around to manage them. Worth remembering you don't have to be a tax payer to buy LTFs and you can buy more than the 500k limit just get no tax relief. She isn't that savvy on investments so I'm just repositioning a few things so she doesn't need to touch them and collect income streams. Main one was UOB Big Cap Thai Div

- I added a couple of RMFs, again to get the tax relief. Simply churned funds, sold some bought others. So I now have Aberdeen APAC, and Smart Capital, as well as Krungrsi Gold RMFand KTAM Bond fund RMF. Funnily enough KTAM Bond RMF is also linked to oversees via a fedder like TMB and K-Bank. I simply sold the TMB non-RMF version and bought the KTAM for tax relief.

So that's my LTFS and RMFS more or less maxed out for the year - just a little to add in August and Sep in LTFs. My current employer also adjusts my salary each month, so I've already had the tax benefit without waiting until after year end.. Thank you to my employer for a great system and to the Thai tax man for the hand outs.

I also sold some funds in my name and bought in the wife's. 2 main reasons: inheritance tax and repositioning:

Sold some of my Aberdeen Emerging Markets and Aberdeen World Opprtunities,

Bought Aberdeen Emerging markets in the wife's name and Aberdeen European.

I still think Emerging Markets offer better value than developed. The switch from a world fund to European just reflects that I think US / UK etc have have good runs, and Europe is still beaten up, with some low valuations

The other reason was for UK inheritance tax purposes to move funds out of my name into hers, to avoid the potential 40% UK IHT, as Thailand currently has no IHT. Then in Thailand funnily enough they announced plans to consider IHT for Thais so I'm keeping an eye on that. There's a good chance it won't come to Thailand, and even if it does, I expect it to by lower than UK, at least to start with.

Still buying each month for the kids in different funds, like I religiously do regardless of where the market is. I put the same in each month and really don't care whether markets are high or low, given I'm looking 10 - 15 years +

Cheers

Fletch

[fletchsmile]

Outside Thailand:

1) I added more to the Singapore REITs I hold. Hence why I haven't looked into K-Bank Property REIT so much in Thailand. I added to FCT (Fraser's Centrepoint), FCOT (Fraser's Commercial) and ART (Ascott linked). All 3 have done quite well so far, so I'm sat on some small capital gains in addition to. I sold one I had in Australia as the divs suffered on tax for foreigners/non-residents making it less attractive than Singapore which is great for tax.

I see these as long term holds: Yield around 6% income stream. Tax free. Singapore dollars exposure + property exposure. Becoming my investment of choice in Singapore. Good diversification.

2) Managed to bring my fixed income holdings up to over 10% of my investment portfolio for the first time ever - getting older - diversifying and chasing income. A key buy was Barclays USD Asia High Yield Bond ETF. What interested me was I could buy in SGD on the SGX to use up surplus SGD, and it yields around 6%+.

3) Reduced my Thailand exposure via Singapore (Aberdeen Singapore Thailand fund), as I really have a large weighting here already - overweight - and the market already looks well quite fully valued plus had added to Thai LTF purchases onshore. As Singagpore often isn't good value on funds because of the charges I bought simple dividend paying ETFs . I bought CIMB DVDS and CIMB ASEANs. They have a wider Asean and Asia spread, plus pay dividends of 3%+ and 4%+.

Again the theme of income streams - Singapore tax free + this time low cost + I could buy in SGD + even though I moved some from Thailand equities, I still preferred EM and Asia to developed markets

4) I spent quite a bit of time searching around for Russia focused funds. The market is really out of favour at the moment. Valuations are low. OK that could last a while, but long term looks interesting. The Russian MICE index is still in negative territory compared to 8 years ago! Not that many great funds around though, and even fewer pay divs. As I bought via Singapore again I bought an ETF: iShares Eastern Euopean Capped - although not listed in Singapore just thru my platform there. It has about 2/3s in Russia in big names and the rest in a couple of other Eastern Europe countries. There's a div of around 2.3% to collect on possibly a long wait for value to be recognised. As I bought in GBP, that's still better than sat in cash even tho it will be a volatile ride. I've been looking at other Russian funds and may buy Neptune Greater Russia unit trust via UK

5) The reason I didn't go for the K-MENA fund is I added to a UK fund I have instead. Templeton Frontier Markets. Frontier Markets have the potential to become the new EMs. They look interesting to me at the moment given the problems in developed countries. Also Fidelity MENA I hold thru Singapore. At some point in Thailand I'll probably add to the K-MENA fund for the kids at least. Still checking out a few more frontier market ideas

6) Bought a couple of individual European stocks in the insurance sector AXA (CS:France) and Alliance (ALV:Germany) to use some Euros and they both trade on P/Es of 10 or less with div yields of 4%+ so the intention is there for the long term.

Anyway that's me for the last few months: some time out + more of the same + LTFs/RMFS as ever + moving more to fixed income as I get older + dividend streams + watching out for inheritance tax in UK and hopefully not here but keeping an eye on it + interested in frontier markets + see EM better than developed

Also looking to see whether precious metals will come into play. Particularly silver but also platinum and gold. They seem as unpredictable as ever tho

What you guys up to?

Cheers

Fletch

Edited September 3, 2014 by fletchsmile

[fletchsmile]

Quick heads up for high net worth individuals (HNWI) in Thailand looking for Thai bonds/ fixed income.

Thai Banks are starting to issue Basel III compliant sub-debt, as some of the regulatory constraints with BOT and SET have been sorted out.

A few weeks back KTB issued the first lot offshore in USD of 10.5 year maturity non-callable for 5.5, then callable by issuer. Interest rate was USD 5.2%

Onshore TMB have just issued onshore THB 15 billion 10 year non-callable for 5, then callable by issuer. Interest rate was THB 5.5%. There would be 15% witholding tax on that. Was very much in demand locally and no problem filling that demand

More often than not the issuer will call after the 5 year/ 5.5 year period. So you're looking at tying up your money for 5 years/5.5 years.

K-Bank are likely to be the next onshore. Rate will be similar ball park to TMB in THB perhaps a bit lower, but with a slightly better credit rating.

You need to know what you're buying, and understand the risks as well as be a HNWI (income 400k a year or assets THB 40/50mio) to be eligible to buy, and would need to contact the bank concerned or possibly your broker. Minimum purchases tend to be THB 100k upwards for domestic onshore.

Cheers

Fletch

Edited September 4, 2014 by fletchsmile

[Naam]

THB denominated subordinates yielding 5.50% minus 15% withholding tax? thank you, but no thank you Fletch! and that applies to Basel III compliant issues too

[AyG]

5) The reason I didn't go for the K-MENA fund is I added to a UK fund I have instead. Templeton Frontier Markets. Frontier Markets have the potential to become the new EMs.

Just a quick comment.

For frontier markets I use Advance Frontier Markets (AFMF), which I prefer for a couple of reasons: (1) it's a closed ended structure (investment trust), (2) it invests in individual funds (some closed ended, some open ended), rather than in individual stocks, which means that the actual stock selection is done by fund managers in the actual markets concerned. (I might add that I'm not particularly a fan of Mobius. His Templeton Emerging Markets IT has badly underperformed over the last few years. I'm seriously considering selling my holding.) It's currently trading at a 7.9% discount to NAV. (It was trading at a 14% discount when I bought it.)

Performance of AFMF has been better than Templeton's fund. Rebasing into Sterling, the returns have been:

0-12m 12m-24m 24m-36m 36m-48m 48m-60m

Advance Frontier Markets 19.4% 30.6% -4.4% -1.4% 15.0%

Templeton Frontier Markets 14.8% 18.7% 5.0% -8.5% 20.4%

5 year annualised performances are 11% and 9.5% respectively.

And for anyone else reading this, the Templeton fund is currently closed to new investment.

[fletchsmile]

Thanks for that AyG. I'll check out AFMF. There s not many frontier markets funds around with thecsame geographical spread and some are overly concentrated in a few countries. I dont think the Templeton fund is anything special and the driving factor was the geography/sector in this case so good to check out others.

I hold it thru my HL SIPP. You re right it is closed to new customers. Existing customers can still buy more and add online.

Cheers

Fletch

[fletchsmile]

THB denominated subordinates yielding 5.50% minus 15% withholding tax? thank you, but no thank you Fletch! and that applies to Basel III compliant issues too

I also passed.

The domestic issue may be of interest though to HNWI looking for THB fixed interest.

It s hard to find close to that yield in THB bonds or THB cash. Sovereigns are around 2% lower. Cash you re lucky to get over 3% pre tax.

Of course you can get higher than 5.5% in other currencies and countries but then you have the currency risk vs THB.

It was over subscribed highlighting the demand out there. Mainly Thais buying though.

Cheers

Fletch

[Naam]

Of course you can get higher than 5.5% in other currencies and countries but then you have the currency risk vs THB.

we are talking 4.68% net and i can name a dozen T1s (some even Basel III compliant) emitted by investment grade rated debtors which yield double in USD and i don't see any currency risk considering the huge positive yield buffer.

[fletchsmile]

Of course you can get higher than 5.5% in other currencies and countries but then you have the currency risk vs THB.

we are talking 4.68% net and i can name a dozen T1s (some even Basel III compliant) emitted by investment grade rated debtors which yield double in USD and i don't see any currency risk considering the huge positive yield buffer.

Like I say. I passed. You would have passed. Different people's risk tolerances and preferences differ

Your comparison isn't really a fair one though. T1s should indeed be paying a higher rate than T2 to reflect the additional risks. As a ball park guide I'd expect a Thai T1 issuance to pay around 1.5% - 2% more than a T2 issuance so you need to be sure you're comparing apples and apples, and comparing a theoretical Thai T1 yield of 7 - 7.5% + to the USD T1 9%+ you're quoting. That's a much smaller currency buffer. USD has lost over 20% in value in the last 10 years for example.

Consider also the cross border risks depending on which USD debtor you're talking, throw in taxation etc, and while it may not be what you or I desire, it will make sense to some people based in Thailand.

Careful also not to confuse also the debtor rating with the issuance rating. For T1's they can be as high as 4-5 notches lower than the debtors stand alone rating which needs to be built into the yield. So many investment grade "debtors" that will then become sub-investment grade or close for the actual rated T1 "issuance".

Worth noting that the KTB T2 issuance offshore was something like 6 - 7 times oversubscribed by international investors. So while it wasn't attractive to you, there were a hell of a lot of financial institutions, PB, fund management companies etc interested and thought it value for money. These are not uneducated investors throwing darts

Horses for courses

Cheers

Fletch

Edited September 6, 2014 by fletchsmile

[Naam]

Your comparison isn't really a fair one though. T1s should indeed be paying a higher rate than T2 to reflect the additional risks. As a ball park guide I'd expect a Thai T1 issuance to pay around 1.5% - 2% more than a T2 issuance so you need to be sure you're comparing apples and apples, and comparing a theoretical Thai T1 yield of 7 - 7.5% + to the USD T1 9%+ you're quoting. That's a much smaller currency buffer. USD has lost over 20% in value in the last 10 years for example.

should i list half a dozen T2 with double digit yields? of course none of them investment grade but at least BB.

talking about USDTHB... fact is that the Baht lost 28% vs USD in the last 17 years

[fletchsmile]

5) The reason I didn't go for the K-MENA fund is I added to a UK fund I have instead. Templeton Frontier Markets. Frontier Markets have the potential to become the new EMs.

Just a quick comment.

For frontier markets I use Advance Frontier Markets (AFMF), which I prefer for a couple of reasons: (1) it's a closed ended structure (investment trust), (2) it invests in individual funds (some closed ended, some open ended), rather than in individual stocks, which means that the actual stock selection is done by fund managers in the actual markets concerned. (I might add that I'm not particularly a fan of Mobius. His Templeton Emerging Markets IT has badly underperformed over the last few years. I'm seriously considering selling my holding.) It's currently trading at a 7.9% discount to NAV. (It was trading at a 14% discount when I bought it.)

Performance of AFMF has been better than Templeton's fund. Rebasing into Sterling, the returns have been:

0-12m 12m-24m 24m-36m 36m-48m 48m-60m

Advance Frontier Markets 19.4% 30.6% -4.4% -1.4% 15.0%

Templeton Frontier Markets 14.8% 18.7% 5.0% -8.5% 20.4%

5 year annualised performances are 11% and 9.5% respectively.

And for anyone else reading this, the Templeton fund is currently closed to new investment.

Thanks again for this. Just had a look thru their website, as well as Hargreaves Lansdown's analysis tools.

Investment trusts and investment trust funds of funds have sort of lost profile in the last couple of decades with the increase of OEICs, ETFs etc. But they used to be able to be good solid core holdings, and this looks one.

Looking back over 5 years, 58% and 68% aren't fantastic returns, but acceptable. As mentioned it's looking forward I'm expecting/hoping for interesting things in these sectors. On the 5 year chart it's also interesting that up to about a year ago Templeton was generally higher, but about a year ago they crossed and AFMF has been pulling away. I guess part of it is the narrowing of the discount between the funds NAV and it's price, compared to the Templeton fund, {but I really wonder when you point out Templeton EM}

AFMF looks worth considering though and I'll add it to my watchlist for when I'm buying FM funds again. The other interesting things with investment trust fund of funds can be looking at the underlying fund investments and checking out those too if they're available. IT really does have a broad range, and look like it could be a solid core investment for anyone in FM.

On Templeton Emerging Markets and Mobius, I used to also hold the fund many years ago when there weren't as many alternatives. I sold it a few years back though for the same reason you highlight. It was consistently underperforming. I like reading Mobius' commentaries and opinions, but for some reason all his knowledge doesn't always translate into superior fund performance. Just had a look at it again. Wow that is poor! You're right. Emerging markets have had a tough few years, and again a reason I like them now and looking forward, but the performance since about April 2011 is just abysmal.

Here's 3 other funds I prefer to Templeton for EMs and were some of the ones I switched into a few years back. Note all 3 have some sort of restriction now on entry (due in part to growth and success):

- for Aberdeen they had a soft close and then implemented a 2% initial charge. (Funny though the Thailand version is similar and still marketed here by Aberdeen Thailand}

- For FSGEM I don't think you can still access this and it's closed to new funds full stop

- For FSEML they have also been reducing inflows, and it is closed to new investors unless you specific approach and ask. I hold this thru Singapore as well but when I wanted to add more the entry fees are too high. So I tried with Hargreaves Lansdown UK. It has been soft closed. So I rang them up and they said they don't list and promote it but it can be bought if a customer approaches specifically. Once invested tho' you can just buy online as usual if an existing company. Not sure if that is still the case

Worth considering, as per tables below. When you look Templeton EM hasn't beat any of them in any of the last 5 discrete calendar years - that's very poor. One or 2 bad years OK, but not 5 calendar years in a row relatively. So the 5 year cumulative is way off. I wonder what they've been doing. If me, as you say time to sell. (Makes me wonder!)

Cumulative performance Investment 3 months 6 months 1 year 3 years 5 years

-Aberdeen Emerging Markets Equity A Acc 8.19% 19.77% 14% 19.84% 69.59%

-Templeton Global Emerging Markets A Acc 9.7% 20.1% 9.61% -6.35% 2.96%

-First State Global Emerging Markets A GBP Acc 6.12% 15.75% 11.29% 33.25% 78.44%

-First State Global Emerging Markets Leaders A GBP Acc 7.46% 18.07% 11.96% 33.33% 79.01%

Discrete calendar year performance Investment 05/09/09 - 05/09/10 05/09/10 - 05/09/11 05/09/11 - 05/09/12 05/09/12 - 05/09/13 05/09/13 - 05/09/14

Aberdeen Emerging Markets Equity A Acc 38.56% 2.13% 4.84% 0.27% 14%

Templeton Global Emerging Markets A Acc 21.71% -9.67% -11.8% -3.13% 9.61%

First State Global Emerging Markets A GBP Acc 30.79% 2.39% 10.47% 8.39% 11.29%

First State Global Emerging Markets Leaders A GBP Acc 28.24% 4.7% 11.61% 6.69% 11.96%

Cheers

Fletch

Edit: Something always goes wrong when I post nice tables Tidied it up a bit - still not so tidy, but clearer and I know you have your own tools to plot. The picture is clear though on Templeton EM. Worst performer of all 4 in every single discrete calender year. Flat over 5 years vs ball park 70%

Edited September 6, 2014 by fletchsmile

[fletchsmile]

Your comparison isn't really a fair one though. T1s should indeed be paying a higher rate than T2 to reflect the additional risks. As a ball park guide I'd expect a Thai T1 issuance to pay around 1.5% - 2% more than a T2 issuance so you need to be sure you're comparing apples and apples, and comparing a theoretical Thai T1 yield of 7 - 7.5% + to the USD T1 9%+ you're quoting. That's a much smaller currency buffer. USD has lost over 20% in value in the last 10 years for example.

should i list half a dozen T2 with double digit yields? of course none of them investment grade but at least BB.

talking about USDTHB... fact is that the Baht lost 28% vs USD in the last 17 years

Yes could be interesting to see the examples you're looking at. After your last post, I thought I should just point out the cheeky little bits that you'd added in there to make your case. Now down from a dozen to half a dozen, and investment grade to sub-investment grade. That's a little fairer As I say not disagreeing and I reached the same conclusion as you from my perspective and risk/reward objectives. I can see how it would appeal and be suitable to some though

BTW 17 year history not really fair sir when looking forward for a 10 yr NC 5 which has max tenor of 10 years, and most like will run for 5 yrs. Noting that you've probably just about managed to touch back to the Asian crisis too. That's being cheeky again isn't it? Looking forward I'd say more chance of the US continuing to decline and hit another serious crisis than Thailand hit another Asian crisis. Particularly the US banking sector and economy compared to Thailand....

Would be interested in the examples though. Also throw in the minimum amount you need to buy, so we can consider concentration risk The THB minimums here were negligible. You did have to prove a little your net worth and competence level (no problem for you I know ), but after that it was THB 100k blocks....

Worth also adding there's a possibility BOT and SET will remove the HNWI restrictions later in the year, so could be available to retail investors here too. So your average Joe or Somchai might be able to buy the domestic issues in THB 100k blocks if they can get hold, rather than the USD 100k minimum blocks on the ones you'll be posting Dr. Naam

Cheers

Fletch

Edited September 6, 2014 by fletchsmile

[Lancelot]

Nice thread Fletch, compliments.

The GF opened an account at TMB and bought the SET50 (Dividend added to Unit Price.) The minimum purchase is 1,000 baht, subsequent purchases 1 baht or more. Annual expenses capped at 1.2% per annum; currently at 0.8818%

Best as I could follow, they asked her several qualifying questions, mostly how did she feel if the unit price decreased and how long was she comfortable investing for. The bank officer was professional and did not try to pressure her or try to convince her to buy another fund- with higher expense fees.

I congratulated her on becoming an investor and treated her to ice cream; she immediately checked the prospectus to see if McDonald's is one of her SET50 stocks

http://www.tmbam.com/pdfs/Factsheet%20-%20TB3_en.pdf

Edited September 6, 2014 by Lancelot

[fletchsmile]

Nice thread Fletch, compliments.

The GF opened an account at TMB and bought the SET50 (Dividend added to Unit Price.) The minimum purchase is 1,000 baht, subsequent purchases 1 baht or more. Annual expenses capped at 1.2% per annum; currently at 0.8818%

Best as I could follow, they asked her several qualifying questions, mostly how did she feel if the unit price decreased and how long was she comfortable investing for. The bank officer was professional and did not try to pressure her or try to convince her to buy another fund- with higher expense fees.

I congratulated her on becoming an investor and treated her to ice cream; she immediately checked the prospectus to see if McDonald's is one of her SET50 stocks

http://www.tmbam.com/pdfs/Factsheet%20-%20TB3_en.pdf

Sensible start. It's good to see people in Thailand generally becoming more aware, and I remember that feeling well on my first purchases of my stocks

Actually this is one of the factors behind why I think EMs will outperform developed markets. If you look at levels of share ownership in the west, it's much more widespread and a lot more people are already in the market. If you look at Thailand, less than 5% of people have any equity based investments at all. As people wake up to the idea and people become more affluent and more interested there's a lot of potential demand to come in the future... That demand will push markets further up...

Kudos to her though. I'd buy her an ice cream too if she could get my Mrs interested

Cheers

Fletch

Edited September 6, 2014 by fletchsmile

[fletchsmile]

AyG

In case you're interested further on FSGEM and FSGEML, HL have recently covered them here. Apart from slight differences in the stats the reports are very similar

http://www.hl.co.uk/funds/fund-news-and-investment-ideas/fund-news--and--alerts/first-state-global-emerging-markets-fund-research-update-2014-09-01

http://www.hl.co.uk/funds/fund-news-and-investment-ideas/fund-news--and--alerts/first-state-global-emerging-markets-leaders-fund-research-update-2014-08-21

Cheers

Fletch

[Lancelot]

Actually this is one of the factors behind why I think EMs will outperform developed markets. If you look at levels of share ownership in the west, it's much more widespread and a lot more people are already in the market. If you look at Thailand, less than 5% of people have any equity based investments at all. As people wake up to the idea and people become more affluent and more interested there's a lot of potential demand to come in the future... That demand will push markets further up...

Kudos to her though. I'd buy her an ice cream too if she could get my Mrs interested

Cheers

Fletch

I like to follow the US S&P 500 and the GF observes me entranced in stock graphs and charts. She expressed an interest in investing, so I encouraged her to buy the SET50.

I agree that Emerging Markets are a huge opportunity for the long term investor. EM countries in general have relatively young populations- and they all want the good life:homes, cars, travel, clothes, technology. Investment product purchases will follow...

The EM consumer has his wallet wide open

Edited September 6, 2014 by Lancelot

[fletchsmile]

Actually this is one of the factors behind why I think EMs will outperform developed markets. If you look at levels of share ownership in the west, it's much more widespread and a lot more people are already in the market. If you look at Thailand, less than 5% of people have any equity based investments at all. As people wake up to the idea and people become more affluent and more interested there's a lot of potential demand to come in the future... That demand will push markets further up...

Kudos to her though. I'd buy her an ice cream too if she could get my Mrs interested

Cheers

Fletch

I like to follow the US S&P 500 and the GF observes me entranced in stock graphs and charts. She expressed an interest in investing, so I encouraged her to buy the SET50.

I agree that Emerging Markets are a huge opportunity for the long term investor. EM countries in general have relatively young populations- and they all want the good life:homes, cars, travel, clothes, technology. Investment product purchases will follow...

The EM consumer has his wallet wide open

In line with a low fee index approach, TMB also do a S&P 500 one with fees of around 1.1% and similar THB 1k minimum entry level. It feeds into the i-Shares main fund off shore. A bit more than you might pay if buying outside Thailand but then more practical for Thais buying from here.

Introduce her to the idea of diversification, and bet an ice-cream on who does better in % terms you or her . Plus she would indeed own some companies like McDonalds in her fund .

http://www.tmbam.co.th/pdfs/Factsheet%20-%20I10_en.pdf

Cheers

Fletch

Edited September 6, 2014 by fletchsmile

[Naam]

So your average Joe or Somchai might be able to buy the domestic issues in THB 100k blocks if they can get hold, rather than the USD 100k minimum blocks on the ones you'll be posting Dr. Naam.

it's worse Fletch because the days of USD 100k minimum tradeable batches are more or less gone as nowadays it's USD 200k i yield and agree that in this respect any comparison is useless and irrelevant for the proverbial average Somchai.

where i don't yield is the arbitrary selection of periods as far as exchange rate movements are concerned.

[fletchsmile]

So your average Joe or Somchai might be able to buy the domestic issues in THB 100k blocks if they can get hold, rather than the USD 100k minimum blocks on the ones you'll be posting Dr. Naam.

it's worse Fletch because the days of USD 100k minimum tradeable batches are more or less gone as nowadays it's USD 200k i yield and agree that in this respect any comparison is useless and irrelevant for the proverbial average Somchai.

where i don't yield is the arbitrary selection of periods as far as exchange rate movements are concerned.

I don't disagree with you on the FX rates: as you say they're uncertain. Could be a gain could be a loss. I think more likely a loss but who knows? I think the last 10 years are more relevant than the last 17 in forming an assessment, but then again who knows. Your 17 included an Asian crisis crash event. I see that as less likely so would strip that out of considerations.

Then it comes down to whether you are prepared to assume the risk or not.

For me if you offered me the choice of THB 320 mio in 1 years time or USD 10 mio in 1 years time as a generous Klingon gift (on condition I'd be forbidden to hedge with financial instruments ), I'd choose the THB as I live here and that's my main expenditure currency, and I'd rather not risk the USD being loss. I deliberately choose large numbers to help focus.

So just that some people - particularly those based in Thailand with largely THB expenditure commitments who are more risk averse might prefer 7-7.5% p.a. in THB for the next 5 years and know exactly what money they should get back in 5 years time in THB terms (assuming no credit default). This may be more appealing to them than 9% p.a. in USD for the next 5 years and not knowing how much those USD would be worth particularly the principal received back in 5 years time in USD and how much that might be worth in THB that's important to them. Someone living in the US may obviously thinks the opposite

So was just flagging why some people might be interested in the bonds mentioned - even though you and I weren't, as in addition some people would rather take 5.5% on T2 than 7.5% on T1.

BTW Should you wish to offer me the choice of THB 320 mio or USD 10 in 1 year time - I'm a man of my word

Cheers

Fletch

Edited September 6, 2014 by fletchsmile

[AyG]

Worth considering, as per tables below. When you look Templeton EM hasn't beat any of them in any of the last 5 discrete calendar years - that's very poor. One or 2 bad years OK, but not 5 calendar years in a row relatively. So the 5 year cumulative is way off. I wonder what they've been doing. If me, as you say time to sell. (Makes me wonder!)

Discrete calendar year performance Investment 05/09/09 - 05/09/10 05/09/10 - 05/09/11 05/09/11 - 05/09/12 05/09/12 - 05/09/13 05/09/13 - 05/09/14

Aberdeen Emerging Markets Equity A Acc 38.56% 2.13% 4.84% 0.27% 14%

Templeton Global Emerging Markets A Acc 21.71% -9.67% -11.8% -3.13% 9.61%

First State Global Emerging Markets A GBP Acc 30.79% 2.39% 10.47% 8.39% 11.29%

First State Global Emerging Markets Leaders A GBP Acc 28.24% 4.7% 11.61% 6.69% 11.96%

Out of curiosity I compared Templeton Emerging Markets IT's performance with First State Global Emerging Markets (which I don't own), and JP Morgan Emerging Markets IT and Aberdeen Global Emerging Markets (which I do own) over 10 years. I also compared performance with iShares MSCI Emerging Markets Index. The 10 year annualised performance figures were:

Aberdeen 16.5%

Templeton 17%

JP Morgan 16%

First State 16.4%

iShares 12.4%

So, apart from the ETF, the long term performance has been pretty similar. (No surprise with the ETF: in Emerging Markets a good fund manager can add value over passive investment.)

Looking over 5 years at cumulative performance the story's a little different:

Aberdeen 69.6%

Templeton 58.5%

JP Morgan 51.4%

First State 78.4%

iShares 36.7%

[Fletch, I think there's a typo in your figures for the Templeton 5 year cumulative performance - it's not as bad as 2.96%.]

Clearly Templeton has underperformed First State and Aberdeen. However, JP Morgan has done even worse over both 5 and 10 years, which is disappointing. This is one holding I'm emotionally attached to for personal reasons.

I've attached the graphs and figures I've used from Trustnet (link at bottom of posting).

Now, after all I've posted here about active management outperforming passive management in Emerging Markets and avoiding investing in the USA, I have a confession to make: I hold EGShare Emerging Markets Core ETF (EMCR). It's based upon the S&P Emerging Markets Core Index which is "an equal-weighted index designed to measure the market performance of up to 116 companies that S&P Dow Jones Indices determines to be representative of all industries domiciled in emerging market countries, subject to a 15% country cap". I bought it because the allocation between countries is rather different from most (almost all?) funds, and with the cap is less dominated by the massive markets of China and India. It also doesn't include Taiwan and South Korea. It's a relatively new ETF and is still pretty small. I'm hoping I don't come to regret my investment. Still, it's returned 12.16% over the last 12 months, which isn't too bad.

Anyway, the fact sheet is at: http://www.emergingglobaladvisors.com/pdf/literature/FactSheet/EMCR_Fact_Sheet.pdf

EmergingMarkets.pdf

[fletchsmile]

Bit strange that AyG.

I ran again thru HL and got the same results as before. Even added in 3 versions of the Templeton fund

Discrete calendar year performance Investment 05/09/09 -
05/09/10 05/09/10 -
05/09/11 05/09/11 -
05/09/12 05/09/12 -
05/09/13 05/09/13 -
05/09/14

First State Global Emerging Markets Leaders A GBP Acc 28.24% 4.7% 11.61% 6.69% 11.96%

Aberdeen Emerging Markets Equity A Acc 38.56% 2.13% 4.84% 0.27% 14%

First State Global Emerging Markets A GBP Acc 30.79% 2.39% 10.47% 8.39% 11.29%

UT Global Emerging Markets 25.94% -3.51% -1.26% 3.31% 14.76%

Templeton Global Emerging Markets A Acc 21.71% -9.67% -11.8% -3.13% 9.61%

Templeton Global Emerging Markets W Acc 21.71% -9.67% -11.72% -2.56% 10.25%

Templeton Global Emerging Markets Z Acc 21.71% -9.67% -11.74% -2.65% 10.15%

Cumulative performance Investment 3 months 6 months 1 year 3 years 5 years

First State Global Emerging Markets Leaders A GBP Acc 7.46% 18.07% 11.96% 33.33% 79.01%

Aberdeen Emerging Markets Equity A Acc 8.19% 19.77% 14% 19.84% 69.59%

First State Global Emerging Markets A GBP Acc 6.12% 15.75% 11.29% 33.25% 78.44%

UT Global Emerging Markets 9.17% 17.39% 14.76% 17.07% 42.26%

Templeton Global Emerging Markets A Acc 9.7% 20.1% 9.61% -6.35% 2.96%

Templeton Global Emerging Markets W Acc 9.87% 20.46% 10.25% -5.17% 4.26%

Templeton Global Emerging Markets Z Acc 9.84% 20.4% 10.15% -5.37% 4.04%

Templeton still looks odd. I just cut and paste, so format isn't great but it's their numbers rather than me re-typing

Here's also a trustnet:

http://www.trustnet.com/Tools/PDFViewer.aspx?url=%2fFactsheets%2fFundFactsheetPDF.aspx%3ffundCode%3dFXF30%26univ%3dU

I also added in the UT GEM sector here as well BTW and all Aberdeen,, FSGEM, FSGEML generally outperform their sector peers, which is one of the things we're looking for, and always a useful check

Cheers

Fletch

Edited September 7, 2014 by fletchsmile

[fletchsmile]

Just looked at this some more. It looks odd. The one I'm looking at says launched in 2004 and fund size 13mio. Templeton has been going longer than that, and is much bigger. So not quite sure what this data is and what the fund is. It's on both HL and Trustnet which is puzzling

I'm sure if you hold the fund your numbers for your fund will be correct, as you'll have your own reasonableness check via your own records. Assuming those are the correct versions, on your numbers, Templeton has been underperforming by its own standards in the last 5 years as you thought and as I remembered.

Templeton has beat the sector averages though, as shown when I added the UT GEM sector later. So on your numbers still look a good fund. Right to keep an eye on it though

Cheers

Fletch

[AyG]

Templeton still looks odd. I just cut and paste, so format isn't great but it's their numbers rather than me re-typing

Mystery solved. I was writing about the Templeton Emerging Markets Investment Trust. You were writing about the Unit Trust of the same name.

Surprisingly the performances are very, very different.

Over 10 years the investment trust has returned 379.8%, the unit trust 113.8%.

Not sure what has caused the difference.

Attached graph and figures comparing the two. Data from Trustnet.

The unit trust really is shockingly bad.

Incidently, Trustnet had a mildly interesting article a few days ago "Only a third of emerging markets funds outperform over five years" - http://www.trustnet.com/News/541779/only-a-third-of-emerging-markets-funds-outperform-over-five-years/

Templeton.pdf

[fletchsmile]

Templeton still looks odd. I just cut and paste, so format isn't great but it's their numbers rather than me re-typing

Mystery solved. I was writing about the Templeton Emerging Markets Investment Trust. You were writing about the Unit Trust of the same name.

Surprisingly the performances are very, very different.

Over 10 years the investment trust has returned 379.8%, the unit trust 113.8%.

Not sure what has caused the difference.

Attached graph and figures comparing the two. Data from Trustnet.

The unit trust really is shockingly bad.

Incidently, Trustnet had a mildly interesting article a few days ago "Only a third of emerging markets funds outperform over five years" - http://www.trustnet.com/News/541779/only-a-third-of-emerging-markets-funds-outperform-over-five-years/

That makes sense. As you say, very surprised at the difference between the unit trust and investment trust. Maybe something is still wrong in the UT stats. As I say fund size looks strange too.

I read the article. Maybe the author has been reading our posts on Thai Visa, as they pretty much confirm what we've said on this thread and the other recent ones by Deaconbell

Particularly when they wrote:

"Though not all of the funds use the MSCI Emerging Markets index as a benchmark, according to FE Analytics, only 15 out of 43 large-cap funds in the sector have outperformed the index over five years.

Among those 15 funds are portfolios run by First State and Aberdeen, which have been the two dominant groups in the sector over the past 10 years or so.

However, the two houses have seen massive inflows leaving of number of their portfolios near, or at, capacity; meaning investors have had to look for other options in the sector."

First State and Aberdeen funds, out-performance, restricting entry...

It also fits with the view that these comparisons with indices are all well and good. They assume people are an "average investor" "in the average fund" or in the "majority of funds" or throwing darts and picking at random. However, if you put the time and effort in, and do your research that changes the whole ball game. Plus you build your knowledge too. Won't be long in my view before Aberdeen Growth in Thailand will have similar issues in terms of needing to slow inflows - as "meand" said there are now others more nimble.

So as a holder of Aberdeen EM, 2 First State EM funds, Aberdeen Growth, Neil Woodford and Anthony Bolton funds in the past, and not Aberdeen's North America fund my "luck" is holding

Cheers

Fletch

[fletchsmile]

I think I should patent my answers to the following:

Statement: "Our research shows that the large majority of active managers have failed to outperform on a consistent basis as well."

Answer: "then don't invest in the large majority of active fund managers..."

Statement: "Our research shows that the average XYZ active managed fund has failed to outperform....."

Answer: "then don't invest in the average XYZ active managed fund... "

We all get it wrong sometimes, but there's some truth in the statement: "The harder I work, the luckier I get"

Cheers

Fletch

Edited September 7, 2014 by fletchsmile

[AyG]

Templeton still looks odd. I just cut and paste, so format isn't great but it's their numbers rather than me re-typing

Mystery solved. I was writing about the Templeton Emerging Markets Investment Trust. You were writing about the Unit Trust of the same name.

Surprisingly the performances are very, very different.

That makes sense. As you say, very surprised at the difference between the unit trust and investment trust. Maybe something is still wrong in the UT stats. As I say fund size looks strange too.

The asset allocations of the two are quite different:

Investment Trust

26.6% Hong Kong/China

14.4% Brazil

12.6% Thailand

9.9% India

6.0% Indonesia

5.5% Turkey

4.8% Pakistan

4.6% South Korea

Unit Trust

13.7% Brazil

12.0% China

10.2% Thailand

9.6% South Africa

7.5% India

6.8% Russia

5.1% South Korea

4.4% United Kingdom

3.8% Taiwan

26.9% Others

Clearly the Unit Trust isn't a clone of the Investment Trust.

Also clearly, both can't be Mobius' best ideas in emerging markets - unless he has a split personality. More likely I think, that he's not really driving the asset allocation.