KTAM claims top spot as provident-fund manager

The company claims it is the best performer among its industry peers, with an average return for provident funds of 7.5 per cent last year.

The average return from provident funds in the industry stood at 5 per cent, KTAM CEO Somchai Boonnamsiri said.

KTAM's provident funds have offered an average return of 7 per cent over the past decade, he added.

The company has offered two asset-allocation options for its provident-fund members. The low-risk choice contains less than 25 per cent of equity in the portfolio while the higher-risk choice incorporates up to 50 per cent of stocks. However, KTAM's pooled funds are applicable to only the low-risk alternative while its single-fund members can choose either option.

Provident funds can be classified by the number of employers into single and pooled funds. A single fund is a provident fund comprising only one employer, while a pooled fund comprises small and medium-sized companies joining together in one fund.

At the end of 2007, about 85 per cent of KTAM's overall provident-fund portfolio was in debt instruments and the remainder in the equity market.

Somchai said the portfolio in the first quarter this year had changed marginally. Stocks accounted for about 17 per cent and debt instruments the rest. Energy shares still control the largest portion in KTAM's provident-fund equity portfolio at 36 per cent, bank and building material stocks at 28 per cent and 9 per cent, respectively, and other stocks the remainder.

"If the opportunity opens up, we will invest more in the stock market," he said.

For the debt-instrument portfolio, government bonds represented the highest portion, the others being commercial banks and private bonds.

KTAM's provident fund will invest only in corporate bonds with an "A" or higher rating, Somchai said.

KTAM's single funds plan to invest in a foreign investment fund (FIF) and the policy is to invest in South Korean government bonds, to be managed by KTAM, said Prapa Puranachote, senior executive vice president and chief provident fund business officer.

Which single fund will invest in the FIF will depend on the decision of the committee of each fund, and each fund will invest a maximum of 10 per cent of its assets under management, she said.

 "We expect an average return for our provident fund this year at 5 per cent, which is better than the 12-month time-deposit return," Somchai said.

As of February 29, KTAM's provident fund assets under management amounted to Bt61.62 billion, representing a 13.74-per-cent market share, with 31 funds, 213 employers and 93,535 employees. Its major customers are TOT, CAT Telecom, Krung Thai Bank and the Bank for Agriculture and Agricultural Cooperatives.

KTAM manages two pooled funds and 29 single funds.

 Somchai expects that the assets under management of KTAM's provident fund in 2008 will increase to Bt90 billion.

Competition in the industry is tough and KTAM will focus more on privately owned companies.

The companies will expand their provident funds' customer base through Krung Thai Bank, its parent firm, he added.

Prapa said that although an employee's-choice service is available at the company, none was yet established at KTAM. Employee's choice is a type of provident fund that allows members the opportunity to choose an investment policy that best suits their own risk and return expectations.

 "Even though we received a good response after KTAM conducted a recent roadshow for the employee's-choice service to its five existing customers, they still hesitate due to risk concerns," she said.

The age of members is the most important factor for making decisions to invest in the employee's choice, she said. Those who are younger choose to invest more in the stock market than do older employees.

This is the second of a four-part series

Next Thursday: MFC Asset Management