Turning point ahead for mutual funds
Thailand’s mutual fund industry is expected to change dramatically over the next five years because of the advent of financial technology (fintech), artificial intelligence (AI) and the FundConnext platform.
“The fact is that fintech will disrupt all intermediaries in the financial industry, including asset management firms, in terms of new [digital] investment tools that can substitute human work, such as AI and robotic investment advisory,” said Thanavut Pornrojnangkool, chief investment officer of Bangkok Capital Asset Management.
The Securities and Exchange Commission has provided opportunities for entry of new players in the mutual fund industry for the past 3-4 years, especially in fintech, and reduced the role of traditional businesses in order to provide greater benefit to investors, Mr Thanavut said.
Besides effects stemming from fintech disruption, the mutual fund industry will experience higher competition when the market regulator allows foreign asset management firms to directly offer investment products for Thais through the FundConnext system and foreign investment funds (FIFs), he said.
As he sees it, foreign asset management companies could offer better investment diversification with lower management fees.
FundConnext is a platform that aims to optimise the mutual fund selling process by linking selling agents and asset management firms more effectively. The objective is to sign up every asset management firm in Thailand to the platform, so all funds can be transacted within a single platform.
“I heard that there is a global asset management firm under negotiation with the Stock Exchange of Thailand to connect trading through the FundConnext platform,” Mr Thanavut said. “If the deal becomes successful, competition [in the mutual fund industry] will increase and investors will experience direct investment and feeder funds through FIFs. This will change the landscape of traditional asset management companies in Thailand.”
FundConnext will also help small asset management firms expand their networks by breaking down barriers to entry.
“It is quite certain that the foreign asset management companies will be entering the domestic market,” Mr Thanavut said.
2019 is expected to be the industry’s turning point, he said, especially for major asset management companies that have large market shares in mutual funds, provident funds, FIFs and feeder funds.
Mr Thanavut said fintech will also disrupt the whole financial industry, but financial operators mitigate this by investing or partnering with fintech startups.
Jessada Sookdhis, president of the Thai Fintech Association, said another factor poised to alter investment information systems is the shift from information provided by institutions under the market regulator and towards crowdsourcing.
Crowdsourcing involves obtaining work, information or opinions from a large group of people who submit their data via the internet, social media and smartphone apps.
“However, crowdsourcing could have scams, and it’s difficult to control and manage this type of information,” Mr Jessada said. “Therefore, the market regulator has to be able to handle this issue. It is a big challenge for the market regulator [going forward].”