As the clock ticks away, seven asset-management companies are about to launch 10 long-term equity funds (LTFs) this month, giving more choices as tax-incentive lovers shop around.

According to the original conditions, firms are not allowed to launch any new LTFs after this month.

They were initiated four years ago in a bid to attract people to invest in equities. This is killing two birds with one stone. First, investors are educated and get familiar with stock investment. Second, the investments boost the trading volume in the stock market.

The LTFs were initiated along with Retirement Mutual Funds. Those who invest in existing LTFs and the newly launched ones will receive a personal income tax rebate of up to Bt300,000, depending on the rate of income tax applicable to individuals.

With the deadline fast approaching, mutual-fund players are now promoting their last batch of LTFs. According to Duangmon Chuengsatiansup, director of the Securities and Exchange Commission's investment management supervision department, there are 10 more LTFs filing for approval from the SEC.

Currently, there are 35 LTFs available in the market, excluding one from Siam City Asset Management, which was closed down as the funds failed to meet the SEC's minimum requirement.

The 35 LTFs account for Bt29.11 billion in net asset value (NAV).

The size of such funds has grown strongly since their launch in 2004, when 17 asset-management firms unveiled 22 LTFs accounting for Bt5.63 billion.

In 2005, the number of LTFs grew to 30 funds and the size expanded to Bt14.18 billion. Last year, four more LTFs were added and the size almost doubled, to Bt25.19 billion.

As LTFs are restricted to stock investment only, the investment structure of most funds are alike - for example, LTFs that invest in the SET50 or in-house index funds. Lately, the trend is gearing up to high-dividend LTFs.

Following the fluctuations in the Thai stock market, most funds are now focusing on high-dividend stocks, as the SET is dubbed as the fourth-highest dividend-yield market in the world.

This is because the money invested in an LTF is locked for at least five fiscal years. Dividend yield of around 5-7 per cent is what fund managers are looking for in order to attract investors.

LTF investors will not only receive the tax incentive, but also can expect a dividend yield and an upside gain of the stock over the five fiscal years of investment.

Another fund variety is the 70/30 format. To avoid the downside of the stock market, this fund is structured to invest in stocks not exceeding 70 per cent of the NAV, while 30 per cent will invest in fixed-income tools.

MFC Asset Management is about to differentiate itself a little bit by launching an LTF for Islamic investors. The details of the fund have not been revealed.

It is likely that there will be some more variety to expect from Kasikorn Asset Management as it already has three LTFs. It is about to launch another two but further details will be revealed after receiving the SEC's approval.

Although there are many LTFs available with similar features, Duangmon suggested that apart from the tax incentive, investors can expect better performance from LTFs.

"Overall, LTFs in general have outperformed other equity funds. This is because the money is parked for a certain time. There's no daily trading to fluctuate the price as much as in other equity funds. The investment structures of LTFs are similar, so many investors may invest in any LTF with the company that they favour," said Duangmon.

Over the past few years, the stock market has shown aggressive rises and falls. There will be 45 LTFs to shop for but to select one for good is difficult. So, behind the similar investment format, investors should dig deep into the details. Then investors will see the difference in performance.

Over five fiscal years, provide enough time for the LTF to pick up from the worst to the best. You wouldn't want to waste five years just to get a negative investment in an equity fund, right?

Piyarat Setthasiriphaiboon

The Nation