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Published on November 7, 2007

PrimaVest Asset Management is the second firm after Asset Plus Fund Management to seize upon the chance to invest in what most marketers tout as the next economic superpowers. In this case, PrimaVest will invest in its parent company's speciality fund, the Allianz-dit BRIC Stars.

Like the Templeton BRIC Fund of Asset Plus, the Allianz fund picks individual stocks rather than using the top-down, broad-brushstroke approach of those that link with specific indexes.

But that is about where the similarities end. The PrimaVest BRIC Star (PBS) Fund is denominated in euros rather than US dollars, which makes it less susceptible to the weakening greenback.

It also tilts towards the financial and industrial sectors, as opposed to energy and materials. And unlike the Mark Mobius-branded Templeton Fund, the PBS Fund levels out its stock allocation, with each occupying no more than 2.5 per cent of the fund, which was worth ¤570 million (Bt28.22 billion) as of the end of September. The fund also shuns putting most of its eggs in the Chinese and Russian baskets, instead investing 53 per cent of its portfolio in Brazil and India.

"It's not that Chinese stocks have too high a [price-to-earnings] ratio. All of these countries have high P/E ratios but very large room for growth," said first vice president and fund manager Siriporn Suwannagarn.

The feeder fund takes a mean-reversion investment method, in that it assumes the stock price will move towards the mean or average, Siriporn said. Simply put, the Brazilian stocks are underperforming, but that does not mean the fund is bearish.

"In India, for instance, productivity has been going up, but the overall infrastructure is largely poor and inadequate," she added.

But there is always the socio-political risk, particularly in governments that meddle with the capital inflow and have poor and opaque governance.

"But if we look at post-war Japan and Germany, we have the same situation of distrust," said Siriporn. "Back then, there were not yet any economic and political reforms."

Still, this fund is catered more to those with high-risk appetites, said managing director Phuemphol Prasertlum. These countries have yet to develop effective and just political systems.

At a minimum of Bt10,000 per investment unit and a 3-per-cent management fee, PrimaVest conservatively forecasts sales of Bt500 million for the fund this year.

Ki Nan Tsui

 The Nation