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After a year of high volatility from the global financial crisis, with the stock market collapsing more than 50 per cent, fund managers are opting for a riskaverse and highly liquid strategy next year.

Asset management companies (AMCs) this year have experienced a lot of turbulence. Aside from the economic slowdown and volatile interest rates, they also faced competition for their customer bases from commercial banks, even though most of the banks are their parents.

This is the first year after the 1997 financial crisis that the overall net asset value of AMCs has fallen. As of December 12, their net asset value was Bt1.34 trillion, down 5.9 per cent or Bt84.77 billion from Bt1.42 trillion at the end of last year.

Net asset value in 2009 is widely expected to grow slowly or even contract again. Many foreign investment funds invested in South Korean bonds will redeem those bonds. That means around Bt200 billion of assets will return to the country. And if the AMCs can't keep their customers on board, overall net asset value will definitely fall.

Next year would be a hard one for all AMCs after the stock market gave up about 50 per cent this year. However, the returns of most equity funds fell less than the SET Index.

Commercial banks are expected to continue attracting depositors next year, although overall deposit rates are likely to fall further by another percentage point due to the downward interest rate trend.

Vana Bulbon, CEO of UOB Asset Management (Thai), said the picture for the fund management business in 2009 was not rosy. The major shareholder of parent company UOB Group in Singapore, who has been in the financial market for five to six decades and passed through several crises, admitted 2009 would not be a good year. His policy for UOB is caution to protect customers from risk. He said there's no need to launch a new fund.

However, Vana said UOB Asset Management in Thailand will issue only funds needed by customers, which are expected to be invested in secured financial assets including government bonds or bonds of strong companies.

He believes equity funds will not be popular in 2009, as investors are in a cautious mode. But most fund managers believe this is the perfect time to accumulate stocks into a personal portfolio with a threeyear horizon.

UOBAM will next year focus on a strategy of "back to basics", cost cutting and risk management. Most new funds would be low risk with principal guaranteed, while the company will keep costs down by not recruiting employees. The local financial instruments that the company will invest in must be rated at least "A-", while foreign financial paper must carry at least an "AA" rating.

The view is not much different at TMB Asset Management. Jotika Savanananda, its managing director, said her company would introduce funds with low risk. TMBAM will focus on funds with high liquidity to reduce risk for customers.

She believes foreign investment will be slower next year and capital is likely to flow to other markets that are more stable than Thailand. Although Thailand's economic fundamentals are in much better shape than during the 1997 crisis, political turmoil has reduced the attractiveness of the Thai market.

Pichit Akrathit, president of MFC Asset Management, has positioned his company to provide alternative investment vehicles for customers by creating property funds.

Next year, MFC will bring out new property funds for customers and serve as the financial adviser for developers who wish to raise capital by setting up property funds. MFC has formed two subsidiaries performing advisory services for the real estate and financial markets.

MFC also plans to offer a private equity fund investing in small and mediumsized enterprises that have not yet gone public but demonstrate high potential to grow and list on the Stock Exchange of Thailand later.

MFC already manages three private equity funds: the Bt2.5billion energy fund, Bt2.8billion tsunami fund, and the Thailand Equity Fund worth almost Bt10 billion.