New Funds in Thailand Suit Investors Wanting Long-Term Gains, Currency Hedge.

May 6--The much-awaited foreign investment funds (FIFs) are in the process of being launched by the five authorised mutual fund companies. This is the first time Thais have had the opportunity to invest in overseas assets with SEC approval.

This is an enormously positive step forward for the investment industry. However, investors should take the time to consider such an investment carefully. If buying for the long term, it is likely they will gain through increased net asset values (NAV) and potentially even through currency movements. A short-term or inadequately considered investment could result in disappointment.

Investors must also consider liquidity and pricing. Unlike typical open-ended funds, FIFs are redeemable only at long intervals, some monthly and some semi-annually. And while units will be traded on the SET, quoted prices are likely to differ from the actual NAVs. While the rationale behind this structure is reasonable from the fund manager's viewpoint, investors needing sudden liquidity may be disadvantaged under such a structure.

Interestingly, while the FIFs are being promoted as investment vehicles, they could also be considered as currency hedges, with investment returns becoming secondary. An ordinary saver or investor is exposed to currency risk through his or her consumption of imported goods and services. An FIF investment could potentially reduce the exposure to import price rises.

Investment strategies are index-related: The investment strategies being offered include an international equity/bond balanced portfolio, an international convertible bond portfolio, and an Asian dollar bond portfolio.

The ...