Thai small to mid-cap equity mutual funds recorded excellent returns in the past 12 months with potential for further growth during the outbreak as some small and medium-sized enterprises (SMEs) are more flexible and able to stay afloat or grow during times of crisis.
According to Morningstar Thailand's research on Thai equity mutual funds over the past three years, small to mid-cap equity funds generated better returns than their larger peers.
Fund managers believe small to mid-cap equity funds have the potential to grow during the pandemic because fund managers can invest in any business able to adapt to people's new lifestyles, or those expected to benefit from the outbreak.
Prapas Tonpibulsak, chief investment officer at Talis Asset Management, said Talis' Mid-Small Cap Equity Fund (TLMSEQ) recorded a 110% return over the past 12 months and 26.2% year-to-date, beating the 10% year-to-date return of the SET Index by a wide margin.
He said large stocks have been slow to grow during the pandemic because they require foreign investment. During an outbreak, foreign funds are unlikely to flow into Thai stocks because of heightened uncertainty regarding a Thai economic recovery.
The pandemic could lead to a slower rate of recovery for the Thai economy compared with other emerging markets as the country remains reliant on tourism for economic growth, Mr Prapas said.
He said TLMSEQ has invested in non-SET50 stocks that have gained from the pandemic, with most high-growth equities in the fields of technology, communication equipment, debt collection and personal loans.
These businesses are attractive because they can grow even during an economic downturn, which is expected to continue until Thailand completes its mass vaccination programme and the country reopens to foreign travellers, said Mr Prapas.
"With the fresh outbreak, these SMEs will continue to grow for at least the next 3-6 months. Small and mid-cap stocks should also continue to grow," he said.
Saharat Chudsuwan, head of marketing and wealth advisory at Tisco Asset Management, acknowledged Thai small and mid-cap equity funds have grown well the past two years.
Tisco Strategic Fund-A (TSF-A), a Thai equity fund under Tisco's management, recorded an 84% return during the past 12 months and 19.6% year-to-date, ranking first in its class for three-year returns at 14.8%.
TSF-A is an active fund investing in 15 companies in the Thai stock market. Its investment policy is flexible and allows fund managers to adjust the portfolio at any time.
This flexibility in fund management leads to high returns and the fund is expected to continue generating good returns this year, he said.
"For long-term investments, we recommend gradual buying of stocks related to global mega-trends such as innovation and technology, new energy and renewable energy, and solar farms through foreign investment funds," said Mr Saharat.
The global economy has started to recover as the IMF upgraded its growth forecast to 6% from 5.5% this year, he said. However, the growth forecast for Thailand remains low at 2-3%, so investors should diversify their portfolios in foreign stocks for higher returns, said Mr Saharat.
Tisco manages several types of funds and raised its assets under management (AUM) by 25% in the first quarter this year, from 53 billion baht to 67 billion. The company achieved its AUM growth target of 10% for 2021, even as the mutual fund industry sputtered.