However, looking at the Thai industry overall, fixed income has made up 50% of AUM for the past 4-5 years, he added.
“This is not unusual because most Thai investors tend to be risk averse,” Leenabanchong told FSA.
“Therefore we want to grow our fixed income business in order to capture the wider segment of Thai AUM.”
The firm’s reliance on equity funds also links it to the stock market. In 2018, the firm’s Thailand AUM was £1.4bn ($1.85bn) — roughly the same as in 2017, he said.
“The reason was because 82% of AUM is in equity products and last year the [Thai market] was down 10%.”
Nonetheless, ASI Thailand aims to grow assets 3-5% this year, which he said is in line with overall Thai industry growth.
The firm’s Thailand office, opened in 2002, has 65 permanent staff, including six in investment management. Leenabanchong aims to add a fixed income investment professional this year.
Half of ASI’s funds are manufactured and managed locally by a Thai team. The other half are foreign investment funds (FIFs), which feed into the firm’s master funds.
“In the past year, multi-asset strategy funds have become popular,” Leenabanchong said.
“For about five years, the market had been strong in Thailand until [a plunge in] mid-2018. Investors want to protect their investments by shifting from equities to fixed income. But fixed income return is only about 1%, so they are looking for something between a high and low risk product.”
Local AM dominance
Thailand’s fund industry is primarily bank-owned asset managers with a client base of bank depositors. Five of them hold 75% of the market, he said..
He believes his firm’s investment process and longer-term horizon sets it apart from competitors.
“Local asset managers go to analyst meetings and make an investment, but we visit the company management as well as crunch the numbers.
“We have to find the right valuation because we invest for the long term and our investment process unique in Thailand. So we have a niche investor segment that subscribes to our philosophy and investment style.”
He added that Thailand’s regulator has issued guidelines for the asset management industry to integrate ESG into their investment process.
“For Thai mutual fund firms as a whole it is a new idea. They will have to go to [investee] company management and ask tough questions, challenge them on issues like excessive carbon emissions.
“It can be done successfully only if you are a long term investor. If you just buy in for six months and then are gone, management won’t listen to you.”
In Thailand, ASI and Manulife are the only stand-alone asset managers. Others have local bank shareholding relationships, such as Eastspring with TMB Bank and UOB Asset Management with UOB Thailand.
“We work with local Thai banks as distributors, but we don’t have shareholder agreements and no plans to do so.
“The issue is that banks also have their own AM unit. Some have open architecture platforms to distribute non-bank products, but they wouldn’t take all 24 of our funds onto their platform because they have their own competing products.”
He added that ASI’s AUM from retail investors is about 40%, the rest institutional.
“We’ve seen strong growth in distribution from insurance products, medium to long term savings. Clients who hold policies can choose to have their investment allocated to different asset classes.”
Private wealth growing
The number of Thai millionaires are expected to grow 26% by 2023 and UHNW ($30m or more in assets) at 29%, according to Knight Frank’s 2019 global wealth report.
These growth rates exceed the forecasts for all global regional averages.
Opportunities have been noticed. The last few years, Julius Baer and Lombard Odier have linked with local banks for wealth management, and most recently LGT launched a wealth management operation locally.
Leenabanchong is also optimistic about Thailand’s mutual fund growth.
Total AUM for Thailand’s mutual fund industry in 2018 was $158bn across 1,600 mutual funds distributed locally, he said.
Ten years prior, in 2008, AUM was $48bn across 238 funds.
The number of mutual fund accounts are about 6 million out of a population of 65 million, he said.
“As Thais understand more about investing and through market education, the younger generation will begin investing as part of retirement savings.”