Asset management firms moving out of banking nest
The business structure of Thai asset management firms may not be dominated by banks in the future, as independent major shareholders could form the bedrock of the corporate structure.
"Fund management in Thailand is gearing toward the international trend, whereby asset management companies have an independent major shareholder [and thus are not under a bank]," said an industry source who requested anonymity.
The source said many reputed investment companies such as Blackrock and Templeton are independent from banks and the designated major shareholders in asset management companies.
The outlook emerged after TBM Asset Management (TMBAM) agreed to sell a 65% stake to Prudential Corporation Asia Ltd's indirect wholly-owned subsidiary Eastspring Investments Singapore Ltd.
TMBAM has also agreed to divest the remaining 35% stake to Eastspring Investments through a predefined mechanism.
After the transaction, TMBAM will continue to be one of the asset management firms selling mutual funds through TMB's platform on a non-exclusive basis.
The deal is pending regulatory approval.
Besides TMBAM, Principal Financial Group has increased its stake to 60% in CIMB-Principal joint ventures across Asean, with CIMB retaining a 40% share.
Most asset management companies in Thailand are under banks, with banks taking the lion's share (80-90%) of the market valued at 4.93 trillion baht.
The largest two asset management companies, Kasikorn Asset Management and SCB Asset Management, control over 40% of the domestic mutual fund business.
As of July 31, there were 25 asset management companies operating as licensed mutual fund managers, 12 of which were under banks' arm, according to Securities and Exchange Commission data.
But it may take time to see changes in market share structure, although growing savings demand via mutual funds could be one of the drivers stimulating future market growth, said the source.
Financial regulators are also encouraging banks and their asset management subsidiaries to be independent in terms of products and investment policies.
Profits that banks received from asset management subsidiaries may be compensated, in the long run, by higher additional services fees, which are generated from various product offerings, said the source.
"We see the TMBAM case as a win-win situation for both TMB Bank and Prudential, [as the latter] can launch an additional flagship in the domestic investment market apart from its insurance business and give its staff relevant exposure," said Pornthep Jubandhu, senior vice-president of SCB Securities.
Mr Pornthep said fees from consulting services will play a more significant role than fees generated from middlemen such as utility payment fees.
An open architecture is a challenging trend for both banks and their subsidiaries, along with mutual fund firms and insurance companies, he said.