Bangkok-based Krung Thai Asset Management is responding to volatility-driven local client conservatism by developing a digital channel for its money-market products and mulling a real estate investment trust fund of funds.
Chief executive Chavinda Hanratanakool told AsianInvestor the firm had seen a 65% increase in the assets of its four MMFs over the past year, amounting to $2.7 billion in net new flows. It has, however, seen a fall in segregated assets, as well as overall AUM on a dollar basis.
Most of the inflows went into KT Plus, a fund that invests in short-term fixed income and targets returns of around 2% – more than double a domestic interest rate of below 1%, Hanratanakool noted.
“This has proved popular because the Thai interest rate is declining,” she said. “Thai people love to see steady returns. Investor appetite is low because of market volatility.”
She identified growing domestic retail appetite to use social media or other digital channels to invest in mutual funds, a trend led by Tianhong Asset Management in China, as reported.
Last year the firm upgraded its internal infrastructure, she added, and this year will focus on improving its web-based information and internet transaction services.
“We are seeing investors trying to invest using this kind of technology, so we need to be able to gear ourselves up to offer these kinds of services,” explained Hanratanakool.
“We are trying to develop our system internally. This year our target is to improve online investment. We plan to develop a [digital] channel for MMFs where clients can invest by themselves.”
Hanratanakool highlighted the challenges that Krung Thai and other domestic managers were facing now due to low interest rates and equity market volatility. The Thai benchmark SET Index has sunk 20% in the past year to 1,287 points on February 15.
“How to deliver yield for clients during market volatility – that is the challenge we are faced with,” she stated. “China is our leading indicator at the moment and it is still waiting for the economy to generate better momentum. I don’t believe we will see that in the first half of this year, so we will continue to see volatility.
“Low oil prices are also a worry and have an impact on investment sentiment," she added. "So how we manage asset allocation and portfolio balance for clients is the major challenge.”
Hanratanakool said Krung Thai was considering offering the Reit fund of funds to counter volatility. The firm has also ventured into offshore equity and high-yield bonds and may offer exposure to frontier markets to provide investment options to yield-hungry clients with a higher risk appetite.
Thai asset management industry has grown 15% annually for the past decade to stand at $153 billion, she said, and many domestic peers have launched products with a higher risk profile, even though domestic investors remain largely conservative due to market conditions.
“The money is coming in two parts, either into lower-risk or higher-risk products. Thai investors want to see other opportunities that can counter the high market volatility.
“Due to the market volatility we have sought to go more into offshore fixed income, in a mixed-asset approach with onshore bonds,” Hanratanakool said. “We have opened up for offshore investment, and we try to fully hedge the foreign exchange exposure on the fixed income side.”
While Krung Thai AM saw its AUM rise 3% in local-currency terms last year, it saw its assets in dollar terms sink some 20% in the 12 months to end-September* due to a strengthening greenback.
Of Krung Thai AM's $14.7 billion in AUM (as of September), mutual funds account for 54%, alternatives 32%, provident funds 9% and private fund products 5%.
* AsianInvestor is due to publish its annual AI100 list of the largest fund houses by assets sourced from clients in Asia Pacific in the forthcoming March magazine issue.
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