Q: What happened to BOAAM (Bank of Asia Asset Management) last year?
A: BOAAM was formerly named Thai Asia Asset Management before it was taken over by the Bank of Asia (BoA) last year. And BoA is 75% owned by ABN Amro. We now have two asset management licences in Thailand. One is for mutual funds. The other is for private funds, including provident funds. The total asset under our management so far is Bt8 billion ($201 million). We now have about 50 staff and four portfolio managers [including Sermchaiwong]. Our plan is to become the leader of asset management in Thailand within the next three years.
Q: How do you plan to do that?
A: In Thailand the general public lacks savings options. That's why they always put their savings money in bank deposit or invest in the stock market, which is risky for most people because they know very little about the market.
The size of managed fund money in Thailand is less than 10% of the total bank deposit. It is very small compared to other newly developed countries. This represents huge potential for the market going forward. After the Bank of Asia takeover we're in the process of building up our brand image and telling people who we are and about the support that we're receiving from the ABN Amro network. This is the kind of message that we have to build up to restore their confidence.
Q: Have you got any long-term plans for the company in the region?
A: We will stride out in the region as part of ABN Amro. The group's commitment to Asia and Thailand is reaffirmed by the regional headquarters in Singapore. We, as an investment arm of Bank of Asia, also work closely with ABN Amro Asset Management in Hong Kong. They also have set up an office in Taiwan. So the whole network is working together to expand our coverage in Asia.
Q: Your company manages private funds. What is the potential in Thailand?
A: A private fund is a cross between a mutual fund and a provident fund. Provident funds are much bigger in Thailand. With a private fund, it's basically a customized private mandate that we market to institutions, like insurance companies.
The private fund market is pretty small. There's a couple of big players who collectively have less than Bt10 billion under management. But we foresee tremendous opportunity in this market. Institutional investors, like insurance companies, in the past managed their investment pool internally and mostly they put the money in deposit or government bonds and a small percentage in equities. So there was no need for these people to resort to a professional manager to help them. But, currently, with the returns in bank deposit and government bond as low as 3% or 4%, they're not getting sufficient investment return. We are now tapping into this market especially for international companies present here. But we can't tell exactly how big it will be.
Q: What's the pension fund environment like in Thailand?
A: The size of the provident fund market at the moment is about Bt170 billion. But the government has commissioned a study to make it compulsory. I think it would take two to three years for it to be implemented because we are just recovering from the economic crisis. Introducing a compulsory provident fund will increase the cost for employers.
We have 62 million people in Thailand, only half of whom are in the workforce. And if you look at the number of workers who have a provident fund, it's only 1 million. And because we don't have a very good social security system, people need to save for the future. And this is the kind of message that we, as a financial services provider, like to promote.
Q: How do you plan to capture the provident market in Thailand?
A: We'll be using the ABN Amro network to help get our message across to multinational corporations, who often have bigger provident funds. I expect the SEC [Securities Exchange Commission] in the future will allow part of the fund to be invested overseas. In that case, fund managers who have more overseas experience will have an advantage.
Q: What's your current product distribution arrangement?
A: At the moment we distribute our products mainly through the BoA network. However, we foresee that other commercial banks, particularly foreign banks in Thailand who haven't any asset management companies, would be willing to sell our funds so they can add them to their existing financial product range. As long as our funds can offer good returns we'll be able to sell our funds not just through our banks but other banks as well.
Q: In the past couple of years when Thailand was in the headlines it was mostly bad news. We're not reading much about Thailand at the moment, is it a good thing?
A: Yes and no. Yes, in the sense that we're not having a crisis. No, because the market is now getting so small that it's being ignored by foreign investors despite a lot positives in the market. For example, recently Moody's upgraded Thailand's sovereign risk ratings to investment grade. But there's no reaction in the market. In fact, the market's been coming down since the Moody's upgrade.
Q: Are there other reasons for the lack of interest in the Thai market other than being small?
A: I think one of the major reasons is that in the last one or two years investors have been focusing more on the growth story. And Thailand has very little of that to offer, whether it's the economy or the tech sector or just a simple telecommunications growth story. It doesn't mean the old economy would not offer reasonable returns. But it would take a while for the market to notice that.
Also the political uncertainty that we are witnessing here doesn't help. I would say that after the politicians are done with the horse-trading the investment outlook will get more rosy.
Q: On politicians doing horse trading - what exactly do you mean and how does it affect the market?
A: At the moment there are problems about new laws and for the budget for this fiscal year to be passed. The Opposition is trying to pressure the government to resign so we may have an early election. With all this going on investors are staying on the sidelines. And if the budget doesn't get passed, or a new election law doesn't get amended, the political uncertainties may drag on for another three or four months. But if the government has things its way then they should be able to solve the problems by November or December.
