New rules for mutual-fund industry
The Securities and Exchange Commission (SEC) has approved draft revisions of regulations related to the mutual-fund industry, especially those governing investment principles in fixed-income instruments.
One of the proposed revisions involves a present prohibition on fund managers investing more than 30 per cent of the net asset value of a fund in debentures issued by a single company. The draft revision seeks to ease this restriction in the case of debentures issue by companies with the same group of owners. This is to prevent a present problem that arises when investment is restricted to one company in a group.The draft revisions, which await official approval, propose allowing mutual funds to invest abroad in similar asset categories to those allowed for domestic investment. However, the countries offering such investment assets must be members of the International Organisation of Securities Commissions or their bourse must be a member of the World Federation of Exchanges. The draft proposes that actual investment must follow a fund's prospectus, and funds cannot lose an amount exceeding their investment value. Also, mutual-fund companies must provide reliable information about investment assets in English via the Internet. For principal-guaranteed funds, the draft proposes that fund managers must be well aware of investment risks. Therefore, principal-guaranteed funds must invest only in government bonds rated AAA or AA by Standard and Poor's, Moody's, Fitch Ratings or other international rating agencies acceptable to the SEC, savings accounts of commercial banks or instruments with low or equal risk to government bonds. If fund managers plan to invest abroad, they must hedge for currency exchange. After the revised regulations become effective, violations will lead to fines against offending mutual-fund companies and monitoring for improvement. Meanwhile, BT Asset Management has set an aggressive target to increase the size of its assets under management from Bt11 billion at the end of last year to Bt40 billion by the end of this year. The company will concentrate on fixed-income and derivatives funds. Yesterday, it announced the launch of its principal-protection foreign-investment fund (FIF), the Gold Link Fund 1. "The fund is a kind of FIF that will invest in private-sector bonds rated AA or better by Standard and Poor's, with another portion in the Gold Price Index," managing director Anusorn Buranakanont said. Unit-trust holders will receive a return of 7 per cent a year if the gold price moves less than US$14 (Bt483) per ounce per week. "If it moves more than this, returns will decline proportionately," he said. From a model tracking gold prices over recent years, there were 40 weeks in the past year in which the gold price moved 1-14 per cent a week. That would represent a 5.38-per-cent annual return from the Gold Link Fund 1. The fund will hold its initial public offering from tomorrow to next Thursday. It will have registered capital of Bt1.5 billion with a one-year maturity. The Nation
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