Seven funds in the series have been launched to date. The intention of the Thai CG (corporate governance) Fund series is to promote investment into Thai companies that have strong corporate governance.
The idea for the fund series was developed by two local entitites − the Federation of Thai Capital Markets Organization and the Association of Investment Management Companies.
The funds are a step toward implementation of ESG (environmental, social and corporate governance) investment principles in Thailand’s mutual fund market, according to Kittikun Tanaratpattanakit, senior research analyst at Morningstar Thailand.
“There is not much research around [ESG factors] in Thailand at the moment, so they agreed to launch corporate governance funds first,” he said.
Eleven asset management firms have signed up to the initiative, including the top industry players, which together command around 90% of the market.
SCB Asset Management, TMB Asset Management, Talis Asset Management, BBL Asset Management, One Asset Management, and Tisco Asset Management have already launched their CG funds.
Krungthai Asset Management is the latest, having launched one on 20 September, as reported in the Bangkok Post. Tanaratpattanakit noted that further launches are expected in the fourth quarter of 2017.
Each firm’s product invests in the same universe of around 120 stocks listed on the Stock Exchange of Thailand that earned at least a four-star rating on corporate governance from the Thai Institute of Directors Association. The funds, which carry the label “Thai equity CG”, are actively managed and reflect the individual fund manager’s views and strategies.
In what may be considered a foray into impact investing, 0.4% of each fund’s management fee will be donated to organisations that promote strong corporate governance and combat corruption.
However, it remains to be seen if that donation will impact the overall cost of the funds, possibly making them more expensive than their non-CG peers, noted Tanaratpattanakit.
It is difficult, and perhaps too early, to gauge investors’ appetite for such funds. The first few were launched by small firms and have not gathered substantial assets at launch, according to Tanaratpattanakit. As the industry’s major players launch their products, brand recognition is likely to play a role in generating interest, he added.
As a step toward implementing ESG investment principles, in February Thailand’s Securities and Exchange Commission launched the Investment Governance Code as a voluntary guideline for institutional investors.