Eastspring Investments, the Asian asset management business of Prudential, has entered into a binding Memorandum of Understanding (MOU) with Thanachart Bank to acquire a controlling stake in Thanachart Fund Management (TFUND), according to a press statement by the firm.
It expects to enter into a definitive agreement by the end of the year, subject to regulatory approvals and the completion of the merger between Tanachart Bank and TMB Bank.
Last September, Eastspring completed an acquisition of 65% of Bangkok-based TMB Asset Management (TMBAM) from TMB Bank. It was the fourth largest asset manager in Thailand, with $12.3bn in assets.
An Eastspring spokeswoman said at the time that Eastspring intended to operate under a co-branding structure for a few years, to “ensure consistency for current TMBAM clients and allow time to establish the Eastspring brand in Thailand.” As part of the purchase, the firm also entered a distribution agreement with TMB Bank.
However, the spokeswoman declined to comment about the TFUND acquisition “until the definitive agreements are signed”.
TFUND is a joint venture between TBANK and Government Savings Bank, which hold 75% and 25% of the shares, respectively. It is the ninth largest asset manager in Thailand, with total assets under management of THB 221.3bn ($6.8bn) as at 31 December 2018, according to the Eastspring press statement.
Chayanee Juengmanon, senior research analyst at Morningstar Research (Thailand), told FSA that it has 107 funds available, of which its Short-Term Bond is the biggest, with assets of THB 46bn.
The firm operates mutual funds, private funds, a provident fund management business and an investment advisory, and the most popular Thanachart fund year-to-date is its multi-income fund, which has received net inflows of THB 12.48bn, the fourth most of all domestic funds this year, according to Morningstar Direct data.
Complementary fund offerings
“If TFUND were to merge with TMBAM, the total asset will be approximately THB 646bn, making it the third largest asset manager in Thailand, after K-Asset and SCBAM,” said Juengmanon.
“TMBAM and TFUND share a similar structure in terms of funds available in market. TMBAM has 63% of its funds as fixed income funds while TFUND has around 53%. Both of them have about one-third of their funds as equity products. Also, 85% of TFUND’s total net asset are domestics funds, while TMBAM has similar proportion of 72%,” she added.
In the Thai market as a whole, foreign investment bond fixed-term funds have attracted by far the most domestic investor inflows so far this year, which replicates a trend seen among international investors who have flocked to new fixed maturity products that offer a predetermined level of income for a set period.
The only other categories that have experienced significant inflows are Thailand Aggressive Allocation, Mid/Long Term Bond and Foreign Investment Miscellaneous products, according to Morningstar Direct data.
Juengmanon pointed out that although the TFUND’s AUM are half the size of TMBAM, it has a wide variety of domestic equities funds that would add to TMBAM’s offering.
“However, based on our sources, there is no official announcement [imminent] regarding a merger between the two asset managers,” she said.
Eastspring’s strategy at TMB AM since its acquisition 11 months ago provides a clue as to how the Singapore firm intends to operate TFUND.
Last month, Bernard Teo, Singapore-based head of corporate strategy, mergers and acquisitions at Eastspring, told FSA that he had identified “a number of gaps”, including active equities and multi-asset portfolios.
Teo also said that Eastspring planned to offer more foreign investment funds, and the head of distribution, Xavier Meyer, emphasised that it intended to delegate management of some them to Eastspring instead of distributing only feeder funds.
Foreign managers have the option to independently set up an onshore presence in Thailand. ASI and Manulife Investment Management are among the few that have done so, but Eastspring has chosen the joint venture route because of the distribution channels provided by the parent banks of the domestic fund manager.
As Teo told FSA: “Thailand’s fund industry is highly dominated by bank-affiliated asset managers. If you look at the top 10 asset managers by size, around nine of them are affiliated with banks”.
Morningstar Categories: Net flows (Thai baht millions)