Will Thai investors to return to foreign funds if the price is right? ______

Blog / 22 Oct 2019

Becky Chiu, Director - Asia

In contrast to many other markets where redemptions are rising sharply, the funds industry in Thailand experienced a period of unprecedented growth during the first nine months of the year.

Recent outflows fuelled by market volatility could be due to local investors becoming more familiar with the funds industry. Once investors begin to understand where the value and safe plays lie they will no doubt return to the foreign fund markets, just like their peers in other Asia markets, such as Hong Kong, Malaysia and Taiwan.

The journey so far

Thai assets in foreign investment funds climbed 60% during 2018, and have since reached $18.4 billion.[1] Morningstar said the total net asset value (NAV) of foreign funds sold to Thai investors grew further in 2019, increasing by 2.3% year-to-date with capital mostly being allocated into investment vehicles running global equity, China-focused equity and property strategies.[2]

Investments via master feeder structures in Thailand experienced marginal growth with a 1.1% NAV increase during the first quarter of 2019, with assets now at THB 400 billion (or USD$13.04 billion). [3] Equity products captured most of these investor inflows and accounted for 59% of the entire master feeder market, added Morningstar. [4] Furthermore, the master feeder market in Thailand continues to be dominated by some of the largest global fund houses including Pimco; BlackRock, J.P. Morgan; State Street and UOB Asset Management.[5]

These flows are being driven overwhelmingly by the country’s sizeable retail and institutional investor community, who are increasingly looking to diversify their portfolio exposures beyond the domestic market into foreign funds and asset classes.

Augmenting regional flows

Elsewhere, regional allocations into the local funds’ industry could potentially grow as a result of the ASEAN CIS (collective investment scheme) programme.  Launched in 2014, the CIS creates a framework allowing for fund units authorised in one participatory country (Thailand, Singapore, Malaysia) to be distributed in the other markets more seamlessly.

Similarly, the Asia Regional Fund Passporting (ARFP) scheme went live in February 2019 connecting the fund markets of Australia, Japan, Korea, New Zealand and Thailand. Thailand is one of the three markets (the others being Japan and Australia) to have in place the infrastructure to receive and accept inbound and outbound fund application requests [6]

Supporting connectivity in Thailand

Better connectivity -enabled through automated order routing – will be critical if Thai investors are to access foreign funds irrespective of whether they are EU UCITS or retail AIFMs (alternative investment fund managers) or managers subscribing to the ASEAN CIS or ARFP regimes. Automated order routing will also be essential if Thai funds are to attract more foreign clients and broaden their investor base.

Calastone is widely considered to be a leading advocate of automation and innovation, and is the largest fund transaction network globally supporting some of the biggest asset managers across multiple markets, including Thailand. By improving connectivity with the rest of the world, the Thai funds’ industry will net enormous benefits.

 

 

[1] Fund Selector Asia (April 15, 2019) Thailand’s offshore funds up in Q1

[2] Fund Selector Asia (April 15, 2019) Thailand’s offshore funds up in Q1

[3] Fund Selector Asia (April 15, 2019) Thailand’s offshore funds up in Q1

[4] Fund Selector Asia (April 15, 2019) Thailand’s offshore funds up in Q1

[5] Fund Selector Asia (April 15, 2019) Thailand’s offshore funds up in Q1

[6] Fund Selector Asia (February 12, 2019) Asia passporting scheme finally goes live

Featured articles