In the first three months last year, in contrast, only 16 mutual funds launched IPOs.

Of the total amount so far this year, almost Bt110 billion went into 70 short-term fixed-income funds and the remainder to two foreign-investment funds (FIFs) issued by Aberdeen Asset Management and MFC Asset Management Plc.

Thanks to the hefty investment in mutual funds, the total net asset value (NAV) of the industry in this year's first quarter surged 7.26 per cent quarter on quarter from Bt771 billion to Bt827 billion, excluding resolving financial institution problem funds and country funds.

Last year, the mutual-fund industry's NAV grew almost 59 per cent to Bt771 billion, from Bt485 billion in 2004.

The NAV of 64 retirement mutual funds (RMFs) rose from Bt19.399 billion in January to Bt19.43 billion last month. The NAV of 30 long-term equity funds (LTFs) jumped from Bt14.18 billion to Bt15.65 billion, while that of 30 FIFs dropped from Bt82.94 billion to Bt76.42 billion.

Maris Tarab, managing director of ING Mutual Funds (Thailand) and chairman of the Association of Investment Management Companies, said the marginal growth in LTF and RMF portfolios was a normal phenomenon, as most investors preferred to invest in these two types of funds in the fourth quarter. The decline in NAV of FIFs was attributable to their redemption by some investors and the baht's appreciation against the US dollar.

From the second quarter of this year onward, the fixed-income funds' frenzy will be phased out, because the interest-rate hike will absorb excessive liquidity in the market. This will mainly be due to high competition in the banking sector, which will see more products launched to lure investors with attractive interest rates.

Mutual-fund executives agree that aggressive moves by the banking sector has affected the mutual-fund industry. Nevertheless, they believe that fixed-income funds will remain as the key fund in this second quarter, but there will be changes in the details.

"The nature of fixed-income funds will still be such that investors will receive a higher return than what banks offer. However, with the close returns, some bank customers may prefer to transfer their savings to some kind of fixed-deposit product," said MFC Asset Management president Pichit Akrathit.

Maris said the investment strategy for short-term fixed-income funds may change a bit.

"There might be mixed investment. Previously, such funds would invest purely in government bonds. To extend the gap of return, they're likely to mix their investment with other bonds that provide a higher return," said Maris.

Other types of products are also likely to be introduced this year, linked to the Thailand Futures Exchange, which will start operations on April 28.

With the SEC requiring 17 asset-management companies to exercise a quota for investing abroad by July, it is likely there will be a series of FIFs launched during this quarter.

Piyarat Setthasiriphaiboon

The Nation