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June 25 (The following statement was released by the rating agency)
Fitch Ratings (Thailand) has affirmed
Thailand-based SCB Asset Management Co., Ltd's (SCBAM) National Asset Manager
Rating at 'Highest Standards (tha)'. The Outlook is Stable.
KEY RATING DRIVERS
The affirmation of SCBAM's rating is driven by the company's established history
of fund management, its strong domestic market position and support from its
sole shareholder - Siam Commercial Bank Public Company Limited (SCB;
AA(tha)/Stable/F1+(tha)). SCBAM also benefits from its parent's distribution
capacity and extensive resources in risk management, compliance and IT.
The rating also takes into account SCBAM's experienced senior management and
investment staff, with staff turnover in equity investment management improving
in 2013. The rating is further supported by a solid control framework,
formalised investment process, and increased automation in front-office
functions after IT upgrades were completed in December 2013. Middle and back
office functions have also been upgraded in prior years.
The main challenges facing SCBAM are expanding its market share and assets under
management (AUM) amid intensifying competition. There is also scope for
improving the performance of its equity funds, and for ensuring integration
across systems following recent front-office upgrades.
SCBAM's 'Highest Standards (tha)' rating is based on the following category
Asset manager operations in the 'Highest Standards' National Scale category
demonstrate an operational framework that Fitch considers superior relative to
domestic institutional standards.
SCBAM benefits from stable ownership by its sole shareholder, SCB, which has
expressed full commitment to the asset management business and demonstrated
operational and financial support for SCBAM. Although its products are
predominantly fixed-income and money-market funds, SCBAM has diversified to
local equity funds, mixed funds investing domestically and globally, multi-asset
class investment including global funds, as well as risk target funds. SCBAM has
also become more customer-centric in its products for institutional provident
and private fund clients.
SCBAM's risk management and control framework is strong and governed by SCB,
using the latter's extensive staff, tools and expertise. Operational and
investment risks are managed through close coordination between SCBAM's risk
management committee and SCB's risk management division. Risk monitoring is
further bolstered by SCBAM's pre- and post-trade compliance. Its pre-trade
checks have improved following recent upgrades in its front-office system.
SCBAM's investment process is formalised, marked by in-depth research,
disciplined buy-and-sell process, formal portfolio reviews and documentation of
investment decisions. Investment decisions are derived from its fundamental
analysis as well as quantitative approaches. Fixed income investment remains its
key strength, outperforming benchmarks in 2013. However, the credit analyst
workload appears heavy. The equity investment process has been impacted by the
departure of senior-level staff in prior years. Equity performance in 2013 has
been relatively weak amid efforts to refine its equity investment approach.
SCBAM's reporting services to investors are in compliance with regulation and in
line with local practice. It has improved communication with provident fund
clients, including on-line accessibility. In 2014, SCBAM will be a registrar for
provident funds under its management, whereby information on subscription and
redemption will automatically be reflected in the company's portfolios, helping
to reduce the scope for input error. SCBAM has conducted detailed fund analysis
(including performance attribution and key risk indicators), but, to date, it
has been mainly for internal use.
SCBAM benefits from SCB's extensive IT resources and a system upgrade of front,
middle, and back-office operations. This has allowed SCBAM to handle more
complex assets. For 2014, SCBAM is considering further improvements for its
risk-management tools, pending selection of key vendors.
Incorporated in March 1992, SCBAM is the asset management arm of SCB. With AUM
of THB963bn (USD29.7bn) at end-May 2014, 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 80% of AUM in fixed income and money
The rating is sensitive to material adverse changes to any of the key rating
drivers, particularly weakened financial conditions, heightened staff turnover
or deterioration of processes and policies. A material deviation from Fitch
guidelines for any key rating driver could result in a rating downgrade.