Home | SEC role | Sitemap | Contact Us
Monitoring fund performance

            In principle, past performance is not a guarantee of future performance. However, it is one of the factors that can reflect a company’s efficiency. Therefore, fund committee can monitor their fund’s performance by using the guidelines below:

            1. Investment policy should be done as agreed

                1.1 The fund committee itself can examine the operation of the management company as follows:
                       (a) Is there any invested assets or proportion of investment in an asset class that violates the fund’s investment policy? For what reasons?
                       (b) Is there a proper portfolio diversification?
                       (c) Does the fund provide a satisfactory risk-adjusted return?
                       (d) Does the assets held have high volatility given that the market index and/or interest rates in the market change? 

                1.2 Compare the fund performance with benchmark
                       The benchmark used should be relevant to the investment policy. For example, the benchmark used to assess an equity fund’s performance should be the SET TRI return while the benchmark used to assess a fixed-income fund’s performance should be the ThaiBMA bond index return. However, if the provident fund has invested in more than one type of asset, the appropriate benchmark must be a composite benchmark which is a weighted average return of benchmarks corresponding to the asset allocation policy. 

                       Sources of benchmark information are as follows:
                       - Stock Exchange of Thailand (benchmarks for equity investment)
                       - Thai Bond Market Association (benchmarks for fixed income investment)
                       - Bangkok Bank Plc., Kasikorn Bank Plc., Krung Thai Bank Plc., and Siam Commercial Bank Plc. (benchmarks for deposit)
    
                1.3 Compare the fund’s performance with other funds’
                       a) Compare your fund’s performance with those of other funds employing the same investment policy. You may ask the fund committees of other funds about their funds’ performance and compare them with yours. For example,

Fund Performance Comparison Table
under the management of Company A, B, and C
Investment Policy : Mixed Fund

Asset Management Company

                 NAV per unit (baht)

Change (%)

 

Year 2001

Year 2002

 

Company A

10

10.65

6.5%

Company B

10

10.55

5.5%

Company C

10

10.75

7.5%

Remark: If Company B manages your fund, he should explain why it generated the lowest rate of return among the three companies. Then, you should analyze whether the result was from the company’s capability or investment constraints, and find out a solution.

                            In addition, you may compare your fund performance with industry composite return that has the same investment policy. 
                       b) Compare your fund’s performance with those of other funds employing a different investment policy. The funds to be compared could be those that are managed by either the same company or other companies. The result could lead to a modification of the investment policy in the future. For example,

Fund Performance Comparison Table
under the management of Company A

Investment Policy

NAV per unit (baht)

Change (%)

 

Year 2001

Year 2002

 

Conservative Fund

10

10.30

3%

Mixed Fund

10

10.50

5%

Equity Fund

10

11.00

10%


 Remark: When modifying the investment policy, you should also keep in mind that higher return normally comes together with higher risk.

                1.4 Set the penalty for violating investment policy
                       When you monitor the fund’s investment in 1.1 and find any policy violation, actions should be taken as follows:
                       a) The investment does not conform to the investment policy 
                            The management company must notify the reasons for violating the policy and provide appropriate solutions. Then, you should consider whether the transaction should be continued. Also, it is necessary to look into the written contract between you and the company whether there is a penalty specified in case of policy violation, if yes, you may follow the process to get the specified compensation.
                       b) Investment to NAV ratio is above the specified limit without making an incremental investment
                           The management company must notify the fund committee within 3 days. Then again, you should consider whether this transaction should be continued. If it is because of an NAV reduction, no action has to be taken.
                       c) Investment to NAV ratio is above the specified limit because an incremental investment has been made
                           (1) Investment limit is not abide by the law
                                 The management company ought to rectify the ratio within 3 days. However, if it is unable to do so within the given period, it must notify the SEC.
                           (2) Investment limit violates the investment policy
                                 The company must notify the fund committee about the reasons and provide appropriate solutions. Then, you should consider if the transaction should be continued. Again, you should look into the penalty specified in the written contract and follow the process to get the compensation.

              2. Monitor the calculation of asset value

                  Normally, asset management companies must calculate the daily asset value using the mark-to-market method as stated by the notice of the Association of Investment Management Companies. Using any other appropriate calculation methods is acceptable depending on the approval of the fund committee.

                   For example, a provident fund has invested in an issue of debentures which the issuer has announced that interest will not be paid for 5 years; thus, an offer price from market makers cannot be obtained. In this case, the price as specified in the notice would not be a good reference for the market price to be used in calculation. Therefore, the asset management company could identify a new market price and report to the NAV verifier and the fund committee for approval. 

                  Pricing assets at a higher value would result in disadvantage of new members entering the fund. On the contrary, if a lower value is assigned, it would lessen the amount paid to resigned and terminated members. 

                  Moreover, you should check the calculation method whether it complies with the notice of the Association of Investment Management Companies. However, the auditor will examine the asset valuation of the fund at least once a year. 

           

last updated date 11/06/2553

Copyright @ 2008 Securities and Exchange Commission. All rights reserved. Best view on Internet Explorer 5.0+ and desktop resolution 1152x864
Disclaimer : This website is set up with the purpose of providing news and information to general public and shall not constitute advice made by the Securities and Exchange Commission. The risk of use of information is assumed by the user. As information contained in this website may from time to time be changed, we nevertheless intend to make it at all time correct and up-to-date. In case you find any incorrect information in this website, please inform us at thaipvd@sec.or.th