Changes to hedge fund regulations meant to facilitate investors, SEC says

 It is “the final frontier” that will help Thai investors prepare for more investments overseas, it says.

The Bank of Thailand relaxed capital-outflow regulations in April as part of a three-year plan (2017-2020) to encourage more Thai investors to venture abroad, and the SEC is trying to match regulations with international standards to support and encourage the development of this trend.

“The BOT has begun the process of allowing for limitless venture abroad, which means that Thai investors will be more exposed to higher-risk products in other countries. But that has led people to wonder why Thai asset-management companies are not allowed to offer the same kind of products first,” said Rapee Sucharitakul, secretary-general of the SEC.

The principles to regulate mutual hedge funds are currently being drafted by the SEC and will be the subject of separate hearings with the private sector and the SEC board.

 If approved, the products will be offered in the first quarter of next year. Nevertheless, it will take six to eight months before companies are ready to offer them since they have to market the products, train their staff and conduct a risk-assessment process.

“We have to launch these new regulations and new products now so that Thai asset-management companies and investors are prepared for the new kind of risk. 

“Buying foreign products in foreign lands is riskier because you have to file complaints to foreign regulators, and that is one point of concern,” he said. 

The SEC will aim to lower the risk for investors by increasing communication and to make sure that asset management-companies are ready to communicate with their customers about the new risk before they can offer such products. 

Under the current draft, a hedge-fund product can only be offered to “ultra high net worth” investors with total assets of more than Bt70 million or an investment portfolio worth more than Bt20 million. 

Jomkwan Kongsakul, director of the SEC’s investment management policy and development department, said the new retail-class mutual-fund regulations that concentrate on the principle-based “value at risk approach” rather than the old rule-based “commitment approach” would be reviewed by the SEC’s board in November and would become effective before the end of this year. 

The draft is currently being revised by the regulator after it passed the second hearing with the private sector.

The highlights of the amendments include what type of assets mutual funds can invest in and the proportion of assets in the mutual fund. 

For example, the classification of equity mutual funds used to be based on the amount of equity in the fund, where more than 65 per cent means that the fund is an equity fund, while the new regulation will concentrate on the fund’s net exposure to determined its class, she explained.