Besides having to be aware of their spending, many people have also felt the need to not only secure their financial status but also find new ways of making their savings work for them.

Looking ahead, ordinary bank deposits may not be as secure and predictable as in the past. The Thai Deposit Insurance Institution is expected to be implemented soon, and once it starts, banks will no longer guarantee the level of personal savings. A capital market disaster may result in losses to personal savings; savers may get most of their money back, but not all of it.

In this environment, mutual funds have come to play a more important role in the capital market. Many ordinary savers have started to get acquainted with this type of investment, basically with a debt instrument called a fixed-income fund.x Others have gone further to step into equity, mixed, property, foreign-investment or derivatives funds.

For those who are capable of taking Bt10 million out of their savings but lack the knowledge to invest it wisely and with good returns, private funds have become an alternative to regular mutual funds.

Private funds vs mutual funds

Sukkawat Prasurtying, executive vice president of Asset Plus Fund Management, paints an easily understandable picture of the two investment channels. He compares private funds to taxis while he sees mutual funds as public buses.

In a taxi, a good driver (the fund manager) takes passengers directly to their destination. There's room for discussion about the quickest way to get there. When taking a public bus, passengers cannot tell the driver which route to take. They may also have to take several buses to reach their destination.

Private fund managers work closely with investors. The funds are tailor-made to suit individual investors who have no need to worry about overall market performance and are concerned only about the performance of their own fund.

Who qualifies?

As of May 30, there were 1,257 private funds in Thailand, run by 24 companies with a total asset value of about Bt130.2 billion. Thailand's mutual-fund business, which is run by 18 firms, manages assets worth about Bt806.4 billion. What is the scope for expanding these figures? At the end of May, total savings in commercial banks registered in Thailand amounted to Bt6.29 trillion, of which Bt1.3 trillion was individual savings.

There were a total of 62.8 million deposit accounts. Of these, 745,737 contained between Bt1 million and Bt10 million, 61,654 contained between Bt10 million and Bt100 million, and 3,440 held more than Bt100 million.

The minimum amount required for investors to set up their own private funds is Bt1 million, depending on limits imposed by different private fund managers. It is recommended, however, that investors wishing to set up a private fund should have an investment portfolio of at least Bt10 million.

Picking a private fund operator

Most millionaires are sophisticated, usually business-owners who have no time to take care of their investments. In choosing a private fund operator, Asoke Wongcha-um, senior executive vice president of Kasikorn Asset Management, offers two important tips.

"It's like going to see a doctor for a specific symptom. You do some homework to find out which doctor or which hospital is good at it so that you can rest assured that your symptom will be cured professionally. It's a similar process when starting a private fund," he says.

"Besides the reputation of the firm, investors should spend enough time talking to the fund manager to establish trust in him and to feel comfortable.

"This business is about trust. You pay extra money to receive professional treatment, so you should consider everything."

The next thing is to check the company's performance and its ethics.

Fee war

The topic of fees also causes concern because nothing comes for free in this world. Fees charged for private fund management, however, are not as high as they appear.

Tisco Asset Management's Head of Private Fund Business, Theeranat Rujimethapass, compares the management fees of private funds to wholesale prices, while mutual-fund fees are retail prices.

"Roughly, it looks as if private funds charge a higher management fee than mutual funds," he says, "but each private fund represents a huge chunk of money.

Calculating in reverse by comparing the percentage of the fee to the total amount of money, you'll find the fees are not as high as some may imagine.

"Many individuals can buy a product at retail prices, but when it's considered on the level of an individual who has a large amount to offer, retail is clearly more expensive than wholesale," Theeranat said.

Each fund operator offers different fees. Investors should do their maths carefully. For instance, if you are charged a low fee, what may happen to your return? If you pay a higher fee, but after expenses are deducted you still get the return you hoped for, won't life be sweeter?

Top five players in the market

Kasikorn Asset Management is currently the biggest player with a 22.2-per-cent share of the market and Bt28.9 billion worth of private funds under its management.

Tisco Asset Management ranks second with 17 per cent and an asset value of Bt22.19 billion. Bangkok Bank, One Asset Management and MFC Asset Management follow in third, fourth and fifth places.

Piyarat Setthasiriphaiboon

The Nation