TMB Bank, which holds a 35% stake in TMBAM Eastspring, clarified that no more fixed-income funds under its affiliates' management will be scrapped after a wave of redemptions prompted the mutual fund firm to terminate four funds.
With different asset allocation policies from other local fixed-income funds, heavy redemptions will not spill over to other funds and mutual fund companies, said TMB chief executive Piti Tantakasem.
"There are only four mutual funds for which major assets have been allocated in overseas bonds, so TMBAM Eastspring sees no need to close any other fixed-income funds under its management," he said.
Moreover, the Bank of Thailand's Mutual Fund Liquidity Facility scheme to pump liquidity to local asset management firms through banks will build up investor confidence amid abundant liquidity in banking system, Mr Piti said.
Most assets of the four funds were allocated in investment-grade foreign bonds and offshore banks' deposits for higher returns than in the local market, but concerns about the Covid-19 outbreak triggered a selling spree in favour of cash.
TMBAM Eastspring, of which 65% is held by Prudential's asset management unit Eastspring, announced on Thursday that it was scrapping its two fixed-income funds -- TMB Ultra-Short Bond Fund (TMBUSB) and TMB Aggregate Bond Fund (TMBABF) -- and terminating two other funds: TMB ThanaPlus Fund (TMBThanaplus) and TMB Bond Fund (TMBBF).
The sell-off prompted the central bank to offer a special liquidity facility to mutual fund firms to prevent the selling spree from snowballing to other funds and markets.
Eastspring is searching for the best solution in selling assets of the four funds to get the highest return possible for the funds' unit holders, Mr Piti said.
TMB, the country's seventh-largest bank by assets, is also the selling agent of TMBAM Eastspring with a quota of 30% of the four funds' size. Most of them were sold to the bank's retail customers.
Mr Piti said unit holders who cashed out of the four funds have parked money into the bank's other financial products, especially TMB No Fixed and TMBAM's government bond funds, so liquidity is not a problem for the bank.
TMB's current assets amount to 430 billion baht with a capital base of 230 billion baht.
To provide liquidity to the four funds' unit holders who have yet to make a redemption, Mr Piti said the bank is offering a low-rate loan to those who are in dire need of cash by using the funds' units as collateral.
There is low demand for the loans because unit holders prefer their money back, he said.
"It is necessary the company cease TMBThanaplus and TMBBF from March 27, and it will liquidate the funds' underlying assets to pay back to unit holders later to be compliance with the Securities and Exchange Commission's announcement," TMBAM Eastspring said in a release.
As of March 25, TMBThanaplus's net asset value (NAV) was 12.1812 baht per unit and its NAV amounted to 78.4 billion baht, of which 42.2% was allocated to cash, 58.8% to debt instruments and 1.05% to other classes. TMBBF's NAV was 12.7 baht each with an NAV of 10.6 billion baht.
Bank of Auydhya (BAY) and Kasikornbank (KBank) said they are ready to support the Bank of Thailand's measures in injecting liquidity to their mutual fund subsidiaries if needed to restore investors' confidence.
Kattiya Indaravijaya, KBank's co-president, said the bank has closely and seriously focused on its subsidiary's risk management. Kasikorn Asset Management's investment has been allocated to various types of government bonds and debentures with a credit rating of at least A, while almost all of its overseas investments are in deposit accounts at large banks with a good credit rating, she said.
BAY president and chief executive Seiichiro Akita assured that all fixed-income funds managed by subsidiary Krungsri Asset Management meet the central bank's Mutual Fund Liquidity Facility criteria, so the bank stands ready to provide liquidity if needed.