Bangkok--1 Jun--Fitch Ratings
Fitch Ratings (Thailand) has assigned the first National Scale Asset Manager Rating in Thailand to SCB Asset Management Co., Ltd. (SCBAM) at ‘M2+(tha)’. The rating applies to SCBAM’s Bangkok-based asset management activities.
The rating is based on SCBAM’s sound track record, its strong market position and leading role in Thailand’s asset management industry. It is underpinned by strong support from SCBAM’s single shareholder - Siam Commercial Bank Plc (SCB, ‘AA(tha)’/Stable/‘F1+(tha)’) - the fourth-largest bank in Thailand. SCBAM benefits from SCB's strong franchise and distribution capacity as the majority of its assets under management (AuM) are distributed through the bank's branch networks. In addition, SCBAM’s largest fixed income fund is supported by a fund-specific liquidity facility provided by SCB in case of market stress.
The rating also reflects experienced senior management and investment staff, as well as increasing operational efficiency arising from regrouping investment management function. Nonetheless, the staff tenor at SCBAM is relatively short while staff turnover was relatively high over the past two years. In 2009, SCBAM transferred certain functions including risk management, audit and compliance, as well as IT to SCB. The transfer has enhanced the quality and robustness of those functions, given the bank’s extensive resources and stringent policies.
SCBAM’s risk management and controls are governed by SCB’s risk management division and SCBAM risk management committee, which focus on managing liquidity risks. Fitch also notes the emphasis on operational risks with a newly implemented tool to support self-assessment of risks. The agency also recognises SCBAM’s pre- and post-trade compliance even though its pre-trade checks are not yet fully automated.
SCBAM’s portfolio management processes are fundamentally oriented, using a blended top-down/bottom-up investment approach. Its investment process for fixed income securities has been rather stable while the equity investment process has been subject to changes over the past two years. Fitch believes the latter needs to further extend its research coverage. The agency also notes a positive performance contribution from the asset allocation department set up in 2009 to allow a deeper segregation of responsibilities within the investment management team.
SBCAM’s investment administration has seen improving automation in trade life cycle management and maintains proactive and regular communication with clients. However, SCBAM’s reporting content contains rather limited disclosure as clients generally do not demand in-depth analysis. Nevertheless it is in compliance with regulations and in line with local peers. Reports on performance attribution and key risk indicators are mainly for internal use.
Fitch recognises the improvements in technology, following the transfer of the IT function to SCB. The level of automation at SCBAM’s portfolio holdings, fund accounting and NAV calculation and its ability to handle more complex assets has notably increased following the first leg of IT upgrade. The full implementation is expected in Q311. SCBAM plans to improve further its technology used in portfolio analysis, trading processes, compliance and performance attribution in 2012.
Key challenges for SCBAM are expanding into higher-margin products amid intense competition, increasing non-group related revenue sources to reduce dependency on SCB in the long term and establishing a longer track record in asset allocation. Other challenges include continued upgrade of the IT platform without potential delays or operational disruptions.
Incorporated in March 1992, SCBAM is the asset management arm of SCB. With AuM of THB536bn at end-Q111, the company is the second-largest asset management company in Thailand. SCBAM invests mainly in the Thai market and covers all asset classes with approximately 70% of AuM concentrating in fixed income and money market products.
In accordance with the applicable criteria report 'Reviewing and Rating Asset Managers', dated 16 August 2010, in conjunction with 'National Scale Asset Manager Rating Criteria', dated 2 July, 2010, SBCAM’s ‘M2+(tha) rating is based on the following category scores, which represents a scale from 1 to 5, with 1 as the highest possible score:
Company & Staffing: 2.00
Risk Management & Controls: 2.00
Portfolio Management: 2.25
Investment Administration: 2.00
Technology: 2.00
Asset manager operations in the 'M2' National Scale category demonstrate low vulnerability to operational and investment management failure relative to the specific characteristics of the national market in question.
The rating may be sensitive to material adverse changes to any of the aforementioned rating drivers. A material deviation from Fitch guidelines for any key rating driver could cause the rating to be downgraded by Fitch. For additional information about Fitch asset manager ratings guidelines, please see the criteria referenced below, which can be found on Fitch’s website.
A full rating report will be available shortly on www.fitchratings.com.
Contacts:
Primary Analyst
Orawan Karoonkornsakul
Senior Director
+662 655 4766
Fitch Ratings (Thailand) Limited
Wave Place 13th floor, 55 Wireless Road
Bangkok 10330
Secondary Analyst
Lertchai Kochareonrattanakul
Senior Director
+662 655 4760
Committee Chairperson
Roger Schneider, CIIA
Senior Director
+49 69 768076 242
Disclosure: TISCO Asset Management Company Limited and Kasikorn Asset Management Company Limited each hold 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operation of, or rating reviews undertaken by, Fitch Ratings (Thailand) Limited.
Note to Editors: Fitch assigns National Asset Manager Ratings to asset management companies operating in countries where, for some rating factors, a comparison with international standards is less appropriate. Those factors are evaluated taking into consideration local specificities. National Asset Manager Ratings, which display a special identifier for the country concerned, e.g. 'M2(tha)' for Thailand, are comparable only to National Asset Manager Ratings assigned in the same country. The ratings are issued on a five-tier scale of 'M1(tha)' — 'M5(tha)' with 'M1(tha)' being the highest rating. The agency may further differentiate ratings by plus (+) and minus (-), as warranted by the scores achieved.
Additional information is available at www.fitchratings.com.
Applicable criteria available on Fitch's website at www.fitchratings.com: ‘Reviewing and Rating Asset Managers’, dated 16 August 2010, and ‘National Scale Asset Manager Rating Criteria’, dated 2 July 2010.
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