Fitch Ratings (Thailand) has affirmed SCB Asset Management Co., Ltd's (SCBAM) National Investment Management Quality Rating (IMQR) at 'Excellent(tha)'. The Outlook is Stable.
KEY RATING DRIVERS
The rating is based on the following category scores:
Investment process: Strong
Investment resources: Excellent
Risk management: Excellent
Company and client servicing: Excellent
Investment performance: Consistent
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' or 'Weak' relative to the standards applied by institutional investors in the national market. Asset managers in the 'Excellent' category demonstrate an operational framework that Fitch assesses as superior relative to domestic institutional standards.
Investment Process
Fitch believes SCBAM has a sound investment process for its broad range of funds. The investment team conducts in-depth fundamental research and executes investment decisions through a formal process. The asset manager also has a well-documented process for reviewing portfolio performance. Quantitative tools, overlaid with qualitative factors, support SCBAM's investment objectives and decision making. Its portfolio managers continue to apply machine-learning technology, extending its use from domestic to foreign equity funds
Investment Resources
SCBAM's investment teams possess breadth and depth of industry experience. Portfolio managers have diverse profiles that align closely with their responsibilities in each asset class. Ongoing development and increased leverage on machine learning and technologies have enhanced long-term performance. Most key senior-level investment professionals have a long record with the firm. Higher turnover in the investment department in 2021 has been mitigated by timely replacements. The number of investment staff and experience remains commensurate with the workload. Key-person risk appears limited, with a relatively stable senior-management team. The firm functionally segregates responsibilities and roles by organising teams according to asset class.
Front-office systems are automated and integrated, showing evidence of regular maintenance and flexibility of functionality and scalability. The investment division has access to multiple data sources. Fitch considers SCBAM's technological and human resources to be a good fit for its investment processes.
Risk Management
SCBAM's parent, The Siam Commercial Bank Public Company Limited (SCB; AA+(tha)/Stable), sets the group's risk policy, but has decentralised risk functions for its non-bank subsidiaries. However, compliance functions remain centralised at SCB, as this ensures third-party independence. SCBAM's risk-management department is functionally independent from its investment staff, although the teams work closely to facilitate an integrated approach to risk control. The risk team uses internationally recognised systems for risk monitoring and stress testing.
Company and Client Servicing
SCBAM has a long operating record in Thailand since 1992. It has an established domestic franchise, with significant footprints across a range of fund types. Combined assets under management (AUM) for mutual, private and provident funds totalled THB1.7 trillion at end-2021. The firm has increasingly offered asset-allocation funds to strengthen its mutual-fund franchise, although fixed-income funds continue to represent over 60% of total AUM, excluding property and infrastructure funds.
SCBAM remains a leading provider of private funds, with total market share of 27% as at end-2021, after AUM increased by 6.7%. This reflects its franchise among institutional and high-net-worth clients. The company's provident fund also remains strong, with the third-largest market share of 13.1%. SCBAM's detailed reports to unitholders for mutual, private and provident funds meet regulatory and industry reporting standards.
Investment Performance
The firm maintained steady performance on a risk-adjusted basis relative to peers. SCBAM's debt funds - the largest portion of its AUM - have performed satisfactorily relative to similar peer funds. SCBAM's performance in equity and asset-allocation funds has also been broadly in line with that of peers.
INVESTMENT MANAGER
SCBAM is Thailand's largest asset management company, with a 19.0% market share at end-2021. The company is a key subsidiary of SCB, the country's fourth-largest banks, with a market share of 14.6% by asset size.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The IMQR is already at the highest level, hence, an upgrade is not possible. However, improved consistency in SCBAM's investment process could see the investment process score improve to 'Excellent'.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The rating is sensitive to adverse changes to any of the five category scores: investment process; investment resources; risk management; company and client servicing; and investment performance. Any negative change in the score assigned to one or more categories could lower the rating.
Any significant change in ownership by SCB that lowers support from the parent may lead to a reassessment of the IMQR rating due to the close linkage between SCBAM and SCB in terms of operational and financial support, policy approval and distribution channel dependency.
Additional information is available on www.fitchratings.com