Global bond funds have been popular over the past year and a half, attracting investments worth 88 billion baht and generating an average return of 0.50% this year to date, according to Morningstar Research (Thailand).
Morningstar reported global bond funds can generate positive average returns this year, even though they are meagre compared with the US policy interest rate of 5.25-5.50%.
"These funds have a policy to hedge against exchange rate risks, using contracts of nearly 3% based on the difference in policy interest rates between Thailand and the US," said the Thai unit of the US financial services company.
The top four funds that can generate the highest returns all focus on investing in short-term debt instruments, which benefited from rising interest rates in the US, said the research firm.
Eastspring Asset Management, which has the largest asset size for global bond funds, has a market share of roughly 23%.
Coming second and third are Krungsri Asset Management and UOB Asset Management, both of which have a market share of slightly more than 20%.
Some investors are concerned about the policy direction of the Federal Reserve, but Morningstar said an interest rate hike does not always have a negative effect on the performance of debt funds.
"Some funds may be diversified into various types of debt instruments that have the opportunity to generate good returns during periods of rising interest rates or high inflation, such as debt instruments with floating interest rates or those based on interest rates and inflation," said the research unit.
Some funds may seek to generate additional returns from the master fund as they predict opportunities from currency movements in the market, according to Morningstar.
"Investors should select funds appropriate for market conditions and their investment goals," said the firm.
The Thai global bond fund with the largest investment value this year is KF-CSINCOM at 3.2 billion baht, followed by UOB UGIS at 3.1 billion.
Regarding Thai ESG (environmental, social and governance) funds, 30 funds have been issued as of the first quarter of 2024 with a combined net asset value of 6.6 billion baht and an average return of -2.43%. The average return of the Stock Exchange of Thailand index during that period was -1.62%.
The Association of Investment Management Companies reported Thai equity funds have a negative return year to date of 2-3%, including Thai ESG funds.