Fixed-income funds give mfc good returns

"We have so far beaten the benchmark. It's been the target we were reaching for," said Jiraporn Boonvanich, executive vice president overseeing the Provident Fund Division.

The firm began its provident-fund business in early 1984. By the end of this past February, it was managing Bt53.49 billion worth of assets with 41 funds, 516 employers and 160,359 employees. The company is the third-largest provident-fund company, with an 11.92-per-cent share of the provident fund market as of February.

Thailand's provident funds have Bt448.54 billion in asset under its management, with 515 funds, 8,944 employers and 1.96 million employees.

Of MFC's 41 funds, 18 are pooled funds, with the rest single funds. Pooled funds can be classified by degree of investment risk into three types: low risk, low to medium risk and mixed.

Low-risk funds invest in government and state-enterprise bonds and deposits.

Low-to-medium-risk funds invest in government and state-enterprise bonds, deposits and corporate bonds with investment grade rated by MFC's investment committee.

Mixed funds have a parallel investment policy to low-to-medium-risk funds but also invest in stocks in a range of 5-30 per cent of an investment portfolio. Jiraporn said most of the company's mixed funds had allocated about 15 per cent of its portfolio in stocks.

MFC's mixed funds have invested mainly in energy, banking and property stocks, she said.

Two- to three-year bonds controls the major portion in its debt instruments' portfolio.

MFC's investment committee is responsible for asset allocation and each fund's performance evaluation, said Jiraporn.

If classified by provident funds' customers, 10 funds are state enterprises, including the Bank of Thailand (BOT) and the Provincial Electricity Authority (PEA), while the remainder are privately owned companies, including Berli Jucker, Siemens, IRPC, Thai Union Frozen Products, Seagate Technology (Thailand) and TMB Bank.

"Our objective is to achieve satisfactory returns, operating system and knowledge," she said.

Jiraporn said the funds should grow 15-20 per cent this year, while those in the industry as a whole should rise 11-12 per cent.

Employees'-choice service is already available, and the central bank is among the employees'-choice customers.

Employees' 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.

The BOT late last year signed a renewal contract to hire the firm to manage Bt10 billion worth of assets under employees' choice. Provident funds belonging to the central bank are divided into three types: one is fixed income, while the other two are mixed funds. Krung Thai Bank and the PEA will soon offer employees' choice to their provident-fund members, said Jiraporn.

Asked about tax waivers for fund members who would like to withdraw their money on an instalment basis after retirement, she said that was pending at the Revenue Department.

A tax exemption would benefit fund members, because most of them would not know how to invest money after retirement, other than placing their money in bank deposits, she said.

This is part three of a four-part series. Next Thursday: Kasikorn Asset Management.