LTFs, RMFs to see B30bn year-end surge

Investors seek last chance of tax perks

About 30 billion baht is expected to be invested in long-term equity funds (LTFs) and retirement mutual funds (RMFs) for the remainder of this year, says Chicagobased Morningstar Research (Thailand).

The investment research and management firm said 2015 has not been a banner year for investments, including LTFs and RMFs, which have been affected by the poor market sentiment.

But previous research found that around 30 billion baht is invested in these funds during the last few months of every year to catch the last chance of tax benefits.

Net assets of LTFs declined by 6% from early this year to the end of October to a total of 261.58 billion baht with a disappointing return of 3.48%. Meanwhile, RMFs showed marginal growth in terms of assets by 0.19% to 170 billion baht with a return of 2.23%.

Seksan Towiwat, assistant managing director of BBL Asset Management (BBLAM), said LTFs and RMFs saw an improvement late in the third quarter.

By the end of the third quarter, there was a positive net inflow of 10.77 billion baht and RMFs stood at 4.42 billion when the market was corrected.

As of October, Kasikorn Asset Management (K-Asset) was top in terms of asset size for LTFs at 64.78 billion baht, followed by BBLAM at 59.58 billion. K-Asset also was top in terms of asset size for RMFs at 44.80 billion baht, followed by BBLAM at 44.61 billion.

“LTF investment has been quite slow this year mainly because market sentiment was sensitive to the volatility of the global economy as well as the slowerthan-expected domestic economy,” said Mr Seksan.

He said LTFs had drawn many more investors in recent years compared with RMFs due to their five-year investment locking period, but this year RMFs seemed to be more popular.

“In the past, investors were more interested in LTFs as they can be sold after five years while RMFs unitholders need to wait until they reach 55. This year, however, RMFs saw a net inflow of nearly 4 billion baht in October alone. This might be due to their variety of investment sectors such as global health care,” said Mr Seksan.

This is echoed by Win Phromphaet, chief investment officer of CIMB Principal Asset Management (CIMB-AM), who said RMFs can invest in other assets apart from local equities including property, real estate investment trusts (REITs) and commodities in both local and global markets, unlike LTFs which are limited to local investment.

Mr Win said LTF performance in 2015 was weaker than last year but still fared better than the index benchmark, which was recorded at -3 to -4% year-to-date.

“But if investors look at long-term returns, due to its strong accumulated gains, it remained in double digits, confirming that equity investment generates better a return in the long term compared with the short term,” said Mr Win.

He said CIMB-AM’s investment strategy for LTFs in the next 12 months would focus on stocks in construction and contracting because these sectors are set to gain from the government’s infrastructure projects due to kick off next year.

The return on the LTF under CIMB-AM management was still positive at 1.86% at the end of October against the Stock Exchange of Thailand, which was down 6.86% in the same period.

The best return on the RMF under CIMB-AM management is offered by RMF I-PROP, which focuses on property, REITs, stocks and commodities in both Thai and global markets. It was the top performer at 16% among other RMFs in the market.

Pongpichet Nananukul, managing director of K-Asset, said the Thai stock market still had potential upside with growth of 15.5% expected next year. It forecasts the SET index next year will reach 1,600 points, with a market forward price-to-earnings ratio of 15.