Players in the asset-management industry can be categorised into four main groups: units of banks, units of securities firms, firms allied with insurance companies, and pure asset-management firms.

Those that are units of banks include Kasikorn Asset Management, SCB Asset Management, TMB Asset Management, Bualuang Asset Management, Krung Thai Asset Management, Ayudhya Fund Management, PrimaVest Asset Management, UOB Asset Management, Thanachart Fund Management, Tisco Asset Management, BT Asset Management and Siam City Asset Management.

Those that belong to securities houses are One Asset Management, Asset Plus Fund Management and Finansa Asset Management.

ING Fund (Thailand) is linked to a life insurer, while the pure asset managers are MFC Asset Mangement and Aberdeen Asset Management.

The new boys on the block will come from Seamico Securities, Philip Securities, Kim Eng Securities and Canada-based Menu life Financial Corporation.

Banks' mutual-fund units will mainly expand their customer bases through the customer data of their parent banks. Securities firms will seek more revenue by setting up mutual funds to manage their customers' portfolios.

Firms linked to insurance companies will find new customers through sales agents and, at the same time, will seek more cooperation from international banks.

This will leave the pure asset-management companies searching for a niche in which to survive.

Early this month, total assets under management in the entire industry broke through the Bt1-trillion barrier, but that is still far behind the Bt7-trillion figure for Thailand's total savings, and although the cake is still huge in the mutual-fund business, competition is rapidly rising.

Clash of the Titans

SCBAM is breathing down the neck of the industry leader, KASSET. It accelerated from Bt113.82 billion in assets under management at the end of 2005 to Bt157.12 billion in the middle of December.

However, KBANK, which owns the country's biggest mutual-fund player with Bt168.25 billion in assets under management, is fighting back. It plans to launch 21 different types of funds in 2007 to widen the gap.

KTBAM lost fourth place during 2006 to TMBAM, which grew rapidly after launching a series of short-term fixed-income funds.

It posted growth of 66.91 per cent against the industry average of 32 per cent. Its assets under management leapfrogged from Bt61.97 billion at the end of 2005 to Bt103.44 billion in the middle of December.

After allowing other banking units to steal a march on it with their launch of fixed-income funds, Bualuang finally jolted awake to post 138-per-cent growth over the past 11 and half months. Its asset size increased from Bt41.98 billion to Bt99.92 billion, thanks to a huge customer portfolio from Bangkok Bank.

Mutual-fund gurus say that if Bualuang takes its job seriously and aggressively, it will need only a small move to lift it to the top of the field within a few years.

The Middleweight Division

UOBAM is maintaining its position at seventh in the mutual-fund field, but Ayudhya Fund Management (AYF), renamed from Ayudhya JF Asset Management after JP Morgan left, is climbing its way back.

It is likely that AYF will sooner or later merge with PrimaVest Asset Management, because the two firms enjoy similar support from Bank of Ayudhya.

AYF can possibly regain the eighth spot from Thanachart in 2007. After its reorganisation earlier this year, it managed to come back from assets under management of Bt29.85 billion in June to Bt37.79 billion in the middle of December, all in less than six months,

Meanwhile, Thanachart grew slightly in 2006 from Bt35.66 billion to Bt40 billion.

The mutual-fund units of securities firms will not be able to afford to fight with the top group. However, brokerage firms need the mutual-fund business, especially when the stock market is unfavourable.

One Asset Management, in which KGI Securities is the major shareholder, was the first unit of a securities firm in the industry. Coincidentally, since Wiwan Tharahirunchote left its managing director post for KASSET, One has been out of the spotlight. Over the past 11 and a half months, the firm's assets under management have dropped from Bt17.59 billion to Bt16.86 billion.

In 2006, ING began to train ING Life's sales agents to help sell mutual-fund products. In a practical sense, this has been difficult because mutual-fund products are more complicated than those in insurance.

More importantly, commissions from selling mutual-fund products are unable to be compared with those from life insurance products.

ING and Aberdeen both counted on international banks as their main selling channels. However, Aberdeen grew strongly with its outperforming equity funds, which have gained significant attention from retail investors.

In 2007, mutual-fund players will not have to win over the customers of their competitors because there is still plenty of room for expansion without treading on each other's turf. However, they will have to perform well and provide interesting products in order to create both reputation and trust, as a kind of preparation for poaching investors from other players.

Products in 2007

Fixed-income funds are a sure thing. Nothing can generate higher returns, with almost zero risk, than this type of fund. Fixed-income funds will shift to maturity periods of longer than three months, following the falling trend of interest rates in the market.

Although the Bank of Thailand's reserve requirement measure resulted in bonds of every maturity rising by 30 basis points, fixed-income funds faced only a slight loss. The direction of this measure is expected to be clearer next month.

As interest rates are about to decline, structured note-linked funds will be an option for those prepared to take a small risk in a bid to obtain higher-than-bond yields.

UOBAM and SCBAM pioneered this market over the past year, but feedback has not been impressive because the investment policy was too complicated.

SCBAM president Adisorn Sermchaiwong admits that his firm underestimated investors.

It made little effort to clarify the investment policy because it thought investors would ask.

Almost every player will launch at least one equity fund next year. Interestingly, there will be more tactics involved in the new funds because the market is already full of index funds, strategic funds, growth stock funds and high-dividend yield funds.

Property Funds, which seemed to be a big prospect for 2007, faced a hiccup following the BOT's austere measure in putting property funds under the reserve requirement for new foreign inflows.

At press time, mutual-fund managers were hoping the BOT would waive this rule. If it does, the mutual-fund business will be back to normal and property funds will be launched continuously throughout the year.

It is unlikely that property funds will crash, but it is likely that the yields investors receive will not be as good as fund managers promised.

With many products to come in 2007, it is strongly recommended that investors carefully study the details and each fund before deciding where to place their money.

Whether it is old school or new school, investment diversification has always attracted an intrigued following. It can be assumed, therefore, that foreign-investment funds will become a must in investors' portfolios.

From lessons learned in 2006, money that all funds have invested, or plan to invest, in the US dollar will be hedged. Moreover, some fund managers are already seeking other investment currencies, including the British pound, the euro, the Swiss franc and the Japanese yen.

New foreign investment funds in 2007 promise to be different from the 33 that already exist, otherwise, there will be no piquant flavour to attract investors.

Last but not least, an exchange-traded fund (ETF) will be launched in 2007. Actually, the first ETF in Thailand is that of the Asian Bond Fund, but the new one will be linked to an index created by the Stock Exchange of Thailand. The SET will select a mutual-fund company and a securities firm to operate the fund.

 Piyarat Setthasiriphaiboon

 The Nation