AYF impresses in tough first half

In the first half of the year, for¬eign net selling on the Stock Exchange of Thailand totalled more than Bt80 billion, while the main stock index plunged more than 10 per cent.

In addition, with the trend towards rising interest rates, shortterm bond yields started to increase.

Fund managers of both equity and fixedincome funds have, therefore, struggled to minimise the effects of these market develop¬ments.

Looking at the first half of the year, Ayudhya Fund Management managed to get four of its equity funds listed in the top10 perform¬ers in the equity category. While the SET Index fell more than 10 per cent, AYF kept the negative return at only 2 to 4 per cent.

The company's AYF Star Dynamic was ranked No 1 among equity funds with a negative return of 2.04 per cent, followed by the AYF Star Capital Fund 70/30 with a negative return of 2.85 per cent. Its AYF Star Capital and AYF Star Equity were ranked seventh and ninth with negative returns of 4.22 per cent and 4.42 per cent, respec¬tively.

For fixedincome funds, the company's AYF Medium Term Fixed Income was ranked No 1 with a positive return of 4.74 per cent in the first half, while the AYF Medium Term Fixed Income Dividend came in eighth with a return of 4.11 per cent.

AYF's chief investment officer says this impressive performance did not, however, happen by acci¬dent.

Prapas Tonpibulsak said that when the company restructured its management team in 2006, it also restructured the company's invest¬ment portfolio in search of greater efficiency and better returns.

Previously, for equity investment the fund manager would be the one who picked the stocks for the invest¬ment portfolio - the socalled "star fund". Since the restructuring, how¬ever, the fund manager has only been able to pick stocks from a cer¬tain group indicated by the compa¬ny - called the "universe".

For bond investment, the com¬pany has set a minimum credit rat¬ing for bonds in which the fund manager can invest, rather than leaving it to their own decision, as was the case before.

"The disadvantage of the starfund strategy is that the investment direction depends very much on the fund manager's emotions. As the Thai stock and bond markets are not complete, our fund managers still have too little experience," Prapas said.

He added that there were about 30 stocks in AYF's "universe" out of more than 400 listed companies in 2006. This was recently increased to 50 stocks.

In order to set up its universe, AYF first conducts both quantita¬tive and qualitative analysis by vis¬iting the companies. Then, analysts must present reports about these firms to a committee for creditdata analysis before sending its recom¬mendation to an investment com¬mittee for a final decision. Only then are the approved stocks placed in the universe.

"Over the first six months of the year, the stock market plunged sig¬nificantly, [our performance] reflecting that our stocks are highquality ones which got less impact from the market," Prapas said.

Most stocks in the company's funds are in the energy, telecom¬munications and commerce sec¬tors.

Prapas predicted that the SET Index at the end of the year would be lower than its end2007 close.

Over the first half, the company's fixedincome funds have invested more in mediumterm bonds and less in corporate bonds due to the rise in interest rates.