Bangkok--16 Jul--Fitch Ratings
Fitch Ratings (Thailand) Limited has affirmed Thailand-based SCB Asset Management Co., Ltd's (SCBAM) National Investment Management Quality Rating (IMQR) at 'Excellent(tha)'. The Outlook is Stable.
KEY RATING DRIVERS
SCBAM's National IMQR reflects its robust investment process, very strong investment resources and multi-layered risk controls. The rating also reflects the asset manager's sound investment performance, strong investment-management franchise and systematic communication with mutual, private and provident fund investors.
SCBAM has consolidated its leading market position in the private-fund segment, while building up its portfolio of multi-strategy asset-allocation funds. Its investment offerings demonstrate depth and breadth, with high product sophistication relative to market standards.
SCBAM's 'Excellent(tha)' rating is based on the following category scores:
Investment process: Strong
Investment resources: Excellent
Risk management: Excellent
Investment performance: Consistent
Company and client servicing: Excellent
National IMQRs are assigned on a descriptive scale based on Fitch's assessment of the asset manager's investment capabilities and the strength of its operational platform. Asset managers are rated 'Excellent', 'Strong', 'Proficient', 'Adequate' and 'Weak', relative to the standards applied by institutional investors in the relevant national market. Asset managers in the 'Excellent' national scale category demonstrate an operational framework that Fitch considers superior relative to domestic institutional standards.
Investment Process
Fitch considers SCBAM's investment process sufficiently robust and well-defined for delivering consistent returns relative to its objectives. The asset manager regularly conducts documented portfolio reviews, engages in in-depth research, and has a disciplined buy-and-sell process. The firm uses quantitative tools extensively to support its investment framework.
Investment Resources
SCBAM's investment resources reflect a breadth and depth of industry experience, clear functional segregation, limited key-person dependence, and portfolio managers with diverse but relevant profiles. Staff numbers and experience are consistent with the firm's coverage, backed by clear portfolio-management responsibilities and a variety of data sources.
SCBAM's investment teams are well-organised and have high levels of collective and individual investment-management experience. Senior-level turnover has been accompanied by timely replacements. Office systems are highly automated and integrated, with evidence of top-notch functionality, scalability and regular maintenance.
Risk Management
SCBAM's risk controls are multi-layered, evident in its integrated system controls, experienced risk managers and rigorous control processes, including regular stress tests, counterparty reviews and reporting of operational, market, liquidity and credit risks. Investment risk management is embedded in the investment process and risk analytics. Its parent, The Siam Commercial Bank Public Company Limited (SCB; AA+(tha)/Stable), governs risk policy, and has been providing risk management resources to SCBAM. However, SCB Group is in the process of decentralising its risk functions, which will afford its subsidiaries greater flexibility in managing risks.
Investment Performance
The firm's risk-adjusted fund performance has mostly been sound relative to peers and recently bolstered by its judicious use of machine learning for selected funds. SCBAM's fixed-income funds - the largest contributor to its assets under management (AUM) - have performed satisfactorily relative to the industry in a number of fund categories. SCBAM has also outperformed peers in equity funds that focus on small- and mid-cap stocks on a risk-adjusted basis. The firm has lagged peers in certain larger-stock fund types, but these funds have improved using futures to bridge their liquidity issues.
Company and Client Servicing
Established in 1992, SCBAM possesses a sound investment-management franchise and has significant footprints across a range of fund types, with THB1.4 trillion of AUM at end-May 2018. The asset manager retains a strong presence in money-market and fixed-income funds, which account for over 70% of total AUM. The firm covers a range of mutual funds, with a breadth of offerings in asset-allocation funds.
SCBAM is a clear leader in the private-fund segment, commanding 43% of the total industry's AUM at end-April 2018. This reflects SCBAM's strong franchise among institutional and high-net-worth clients. The firm communicates with unitholders systematically, often exceeding regulatory and industry reporting standards. This is evident in SCBAM's detailed reports to unitholders for mutual, private and provident funds.
RATING SENSITIVITIES
The rating is sensitive to adverse changes to any of the following five key pillars: investment process; investment resources; risk management; investment performance; and the company's performance, including client servicing. Any negative change in the score assigned to one or more pillars could lower the rating.