CG mutual fund close to fruition

The imminent creation of a mutual fund group by an alliance of asset management firms to promote companies that demonstrate good governance will invest in active funds, passive funds and exchange-traded funds, says Voravan Tarapoom, chairman of the Association of Investment Management Companies (AIMC).

The corporate governance (CG) initiative of 15 asset management firms, in cooperation with the Institute of Directors (IoD) and other organisations, will set a criteria for stocks to qualify for the funds, including winning awards for CG, eco-friendly businesses, social contributors and companies that have introduced anti-graft practices.

“The 15 firms all believe the CG funds will help the development of the securities industry and the stock market here,” Mrs Voravan said. “We plan to set a strict criteria for the type and amount of stocks we will invest in, and also for the appropriate universe of securities.”

The fund will be open to investors by year-end, she said.

Veera Vutthikongsirigool, first senior executive vice-president at Krungthai Asset Management, said every mutual fund set up under the collaboration will invest the similar universe of securities, so that universe must have a sufficient number of securities to serve investment demand.

Smith Banomyong, chief executive of SCB Asset Management (SCBAM), said the initial fund will invest in stocks selected by an independent body. The criteria can focus on various angles apart from CG, such as environmental, social and corporate governance (ESG) or anti-corruption, applying the criteria set by the IoD or the Stock Exchange of Thailand (SET), he said.

Peerapong Jirasevijinda, chief executive of BBL Asset Management (BBLAM), shared his experience in setting up Thailand’s first CG mutual fund, BKIND. BBLAM requested listed companies fill out a survey, allowing the firm to create a short list of eligible stocks before making a final investment decision based on each company’s quality of ESG and long-term yields.

“We also have to follow up on the performance of these companies to make sure they are continuing to apply ESG and CG practices,” Mr Peerapong said. “We alert firms in our fund if they are failing to follow the ESG protocols, and if they can’t improve themselves on time we will cut them out of the portfolio.”

There are over 90 securities in BKIND’s eligible universe.

Initially the consortium agreed to use a minimum of three stars in the IoD’s 2016 CG report as the first bar for inclusion. Some 455 companies met this minimum. The fund will then cross-check to find listed companies also recommended by the Collective Action Coalition Against Corruption, which has some 120 firms, and the Thailand Sustainable Investment list, which has 51 companies.

The 15 firms in the CG initiative are Krung Thai Asset Management, Krungsri Asset Management, Kasikorn Asset Management, CIMB Principal Asset Management Thailand, TMB Asset Management, SCBAM, BBLAM, Bangkok Capital Co Ltd, UOB Asset Management, One Asset Management, MFC Asset Management Plc, Talis Asset Management and Asset Plus Fund Management, Phatra Asset Management.

The AIMC will announce the list of those stocks that pass the initial selection process to encourage other companies to adopt CG practices.