How the money managers do it

High inflation, domestic political tension and a global economic slowdown are challenges for all fund managers. Their tactics in managing people's portfolios to overcome these problems can serve as an interesting lesson for ordinary investors.

The average inflation rate is expected to be about 8 per cent this year, and there will be little surprise if it reaches double-digit figures this month or next. It already reached a 10-year high of 8.9 per cent last month, and its constant rise makes it increasingly difficult for fund managers to beat in terms of return on investment.

Domestic political tensions still linger, hammering away at investment sentiment, while the global economic slowdown and the credit crunch have cast a dulling pall over the entire capital market.

In these circumstances, it is interesting to learn how fund managers manage their own investment portfolios and how they recommend we look after ours. Three fund managers have revealed their strategies to The Nation.

Voravan Tarapoom, managing director of BBL Asset Management, said despite current uncertainties, she had not changed much about her personal investment portfolio.

Generally, she allocates a third of her monthly income to investment. Last month, she invested in a gold fund, a retirement mutual fund and a long-term investment fund - up to the limit for tax benefits.

If all of the negative factors continue, she will switch to fixed-income funds in both local and foreign markets and the gold fund.

Voravan's portfolio consists of both low- and high-risk assets in a 60:40 proportion. The low-risk assets include fixed-income and gold funds, while high-risk assets include stocks in local and foreign markets in a 75:25 proportion. She regards her investment portfolio as financial preparation for her retirement.

"When interest rates are on the rise and the stock market plummets, it's not surprising to see people dumping stocks. But you should not dump all of your stocks, and those with limited savings for retirement should not invest in stocks. Fixed-income assets are a better choice," she said.

Prapas Tonpibulsak, chief investment officer at Ayudhya

Fund Management, said he focused his personal portfolio on the stock market and planned to make it a long-term investment for his retirement.

"I believe the stocks in which I've invested will be able to survive the current economic crisis. I have invested mainly in stocks with good fundamentals and have not focused only on some particular groups of stocks," he said.

Despite current stock-market volatility, good stocks with high potential will still provide significant gains, he said.

Prapas admitted he had made his personal portfolio resemble Ayudhya Fund Management's investment portfolio. He focuses mainly on energy stocks in the belief there will be significant demand for energy in the future despite efforts to find alternative sources.

He also invests in telecom stocks, because he believes the new third-generation mobile-phone technology will generate significant future incomes for operators.

Darabusp Pabhapote, executive vice president of Krung Thai Asset Management, recommended investors allocate 20-40 per cent of their investments to money-market funds, most of which generated rates of return higher than most fixed-deposit rates. Investors are also able to shift their money from money-market funds to other types of funds as they wish.

However, she advises investors against placing all of their money in money-market funds, because despite their ability to surpass fixed-deposit rates, their return is still not high enough to beat inflation.

She said investors should place an additional 10-20 per cent of their money in short-term fixed-income investments like one- or two-year bonds, which would help boost overall returns above those from money-market funds.

Moreover, investors should also allocate money to stocks, commodities and real estate in the proportions of 20-40 per cent, 10 per cent and 10-20 per cent, respectively.

Despite the stock market having been affected by high inflation and high interest rates, stocks will help retain investors' spending power in the long term, and commodity and real-estate alternative investments will help cover inflation risks, because their prices generally adjust in accordance with the inflation rate.