Phatra WM eyes Thailand’s self-managed wealth

Industry Interviews

Assets of Thailand’s do-it-yourself investors exceed that of clients in the private bank system, according to the head of wealth management at Phatra Wealth Management.

Thailand’s three largest banks (SCB, Kasikorn, Phatra) each have around $20bn in assets under management (AUM), totalling roughly $60bn, Narit Kosalathip, Phatra’s managing director and head of wealth management, estimated.

But the figure represents money in the private banking system. Thailand has investors who manage wealth themselves, buying their own funds and stocks, basically do-it-yourself (DIY) wealth management, he said.

“There is at least $100bn in the DIY space. It’s a segment that is actually bigger than financial institution wealth management,” Kosalathip said.

“Growth will come from conversion from DIY into the AUM base of private banks.”

Foreign partners sought

Phatra WM is the result of a 2003 management buyout of a joint venture securities brokerage run by Merrill Lynch and Thailand’s Kasikorn Bank.

Kosalathip, who was part of the management buyout team, said the firm still partners with BOA Merrill Lynch in investment banking and institutional brokerage and research collaboration.

Phatra’s focus is on high net worth clients with at least $1m (THB 30m) in investible assets. More than 90% of clients are advisory accounts. Six years ago, tailor made discretionary portfolios were introduced after the firm launched its own asset management unit, he said.

The top pick fund list has 30-40 products, global and local. The focus list has 100 funds. A CIO office is in transition to an investment solutions team with 18 specialists for various products.

AUM (ex-bank deposits) is 540bn THB ($17.7bn).

The firm has feeder fund arrangements (for example, the Capital Group New Perspective Fund) as well as direct distribution agreements with six global fund houses, including Blackrock, JP Morgan AM and Pimco.

More partnerships are sought.

“We have quite enough in terms of product choice, but there is no harm working with more fund houses who might have some niche in certain areas,” Kosalathip said.

The cost is lower for direct investment compared to feeder funds, he said. “On local feeder funds it’s a standard 1-1.5% fee, but direct distribution allows flexibility and for clients with a sizeable investment ticket we can give a special rate.”

In general, clients expect returns of 6-7% per annum for the total portfolio, he said.

Kosalathip is interested in alternatives and private equity is a new area for the firm. Recently it launched the New Growth Tech Fund 2 with private equity giant KKR. Minimum ticket size is $1m and Phatra brought in 70 clients, he said.

The plan is to bring in more private equity (PE) funds. “Investors need to diversify across PE into private debt and real estate. On top of that, there’s vintage diversification,” he said.

Also in the alternatives asset class, hedge funds are a main area of interest, but mainly big names like Bridgewater. “The capability to select boutique hedge funds is not our expertise.”

Global banks and offshore assets

Phatra had a working relationship with Credit Suisse to invest client assets offshore, but the firm has recently filed to end the cooperation.

“Credit Suisse has an onshore [wealth] operation themselves so the [business] conflict is too much,” Kosalathip said. “They have to manage the conflict of interest and the business we bring to them is not justified from their perspective.”

Kosalathip said his firm recently set up a unit to advise on family wealth planning and management will continue to hunt for a global bank partner.

“Our view is we need to have that [offshore global bank] offering for tax purposes or even for family trust.”

Offshore banks crowding in

Thailand’s private wealth has a lot of drivers. GDP growth has been 3-4% annually, wealth is growing — HNWI wealth should grow 9.9% to $401.2bn next year, according to an SCB Julius Baer report – and regulations for local investors have been continually relaxed.

Those are some reasons private banks have been targeting Thailand.

Julius Baer and Lombard Odier offer onshore wealth management services via local partnerships and Credit Suisse, LGT and Citibank have local operations. Thailand is a target for Singapore’s VP Bank and most recently, DBS said it plans to expand onshore services with offshore products.

Kosalathip believes another driver is the Common Reporting Standard (CRS), which aims to combat tax evasion globally and which Thailand is signatory to, attracting more private banks.

The majority of Thai assets are kept offshore, he said. If Thai investors put money in offshore banks, it’s a legal grey area because the Bank of Thailand has regulatory authority over capital outflows, he said.

“When people want to invest offshore they find ways to remit money out. But in many cases this is in a grey area of the law.

“Thailand signed the CRS and in 3-5 years, regulators will ask people why, for example, they have $10m in Singapore or in Hong Kong.

“So you’ll see more global private banks set up onshore to invest [Thai money] offshore and reduce those risks.”

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