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Thai Mutual Funds Part 2

26 June 2012

Hi All, following on from my previous blog on Mutual Funds (Part 1), it gives me great pleasure in presenting to you Part 2:  Thai Mutual Funds.

Q:  When did it all start for Thailand?

A:  The Thai Mutual Fund industry began life in 1975 through a joint venture with the Thai government and the International Finance Corporation (IFC).  2 years later in 1977 the first Mutual Fund was offered.

Q:  What kind of Mutual Funds has Thailand got to offer?

A:  There are typically four types:  fixed income, equity, mixed and property funds.  The fixed income and equity based funds dominate the Thai asset management industry.

Q:  Thats interesting, but why are the equity funds so popular?

A:  There are really two categories you can place equity funds under.

No tax benefit:

Equity Index Fund // General Stock // Partial Foreign Equity Fund // Equity Foreign Investment Fund // Equity Feeder Fund and Exchange Traded Funds.

Second category – Tax Benefit:

Long Term Funds (LTF) and Retirement Mutual Funds (RTF).  According to the Thailand’s tax department, each individual is allowed to deduct taxable income up to 15% off total taxable income.

Q:  And why are LTF’s and RMF’s subject to tax relief then?

A:  The Thai government wants to promote longer term investments.  So LTF’s and RMF’s have to be held for a minimun of 5 years.

Q:  Anything to watch out for?

A:  Yes, Trigger funds have increasingly gained interest among investors since their returns beat inflation at a time when interest-rate risk is still high.

Basically, a trigger fund will automatically redeem and/or switch the units on behalf of the investors when it meets one or more predetermined criteria, usually a rate of return. The main benefit of this type of fund is to ensure investment discipline at a time of high volatility.

Hopefully thats given you at least some insight into the Thai Mutual Funds Industry, if not feel free to contact me directly as below. And finally I have to protect my derrière with a disclaimer:

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.  You should study any investment fund’s prospectus and consult a qualified tax professional for tax-related advice prior to making a decision to invest.

Simon Osborne

Vice President

simonosborne@broadgatefinancial.com