New Thai sovereign fund to issue local mandates

Thailand’s asset management industry looks set for a major boost with the set-up of a new sovereign entity, the Thailand Future Fund (TFF), which aims to drive more investment in domestic infrastructure.

The fund will deal exclusively in external mandates, with the country's Securities and Exchange Commission (SEC) confirming that locally licensed asset managers would be awarded mandates. The investments will be global, so foreign fund houses should also get a piece of the action.

TFF will be established as a public-private partnership fund, and the country's finance minister has already reportedly begun talks with prospective foreign investors, including China Investment Corporation.

It is understood the fund began operations at the start of this year, although no money has been allocated yet and AsianInvestor could not ascertain any detail on staffing. 

Sources confirmed that the Bank of Thailand, the central bank, would create TFF with an initial Bt100 billion ($2.8 billion) to be invested in infrastructure projects. The fund will also be listed on the Stock Exchange of Thailand.

Finance minister Apisak Tantivorawong reportedly discussed the new fund at an economic development event in Bangkok last month: “We set up this fund because we want the private sector to participate. This way, we will have long-term funding from insurance firms and retirement funds.”

Asian sovereign institutions are looking for suitable infrastructure projects in the region, according to press reports, and last week Tantivorawong led a delegation to Beijing to meet Chinese investors, both state enterprises and private companies.

Songyod Bunjoungmanee, a director of the equity and infrastructure department at the SEC, told AsianInvestor that, as a developing country, Thailand faced challenges to meet demand for infrastructure investment. The new fund is expected to help on that front. 

In December, the Thai government approved plans for 20 infrastructure projects as part of a campaign to stimulate development and investment over the next five years.

Bunjoungmanee explained that the Ministry of Finance and the Vayupak Fund, an existing government-funded infrastructure investment vehicle, would put up the Bt100 billion for TFF. He said it had not yet been decided how much of the future funding would come from within Thailand and how much from foreign investors.

The exact terms of the fund and its return target have not been set, said an SEC spokesman. So far, the only details are that it will invest directly in infrastructure projects and receive a share of future revenue, or indirectly by holding shares in infrastructure companies. The spokesman added that the capital would be managed by mutual fund houses.

TFF will invest in railways, toll roads, electricity, water supply, airports, deep seaports, telecoms, alternative energy, water management, natural disaster management, pipeline transport and waste management.

The fund is part of an initiative by Thailand's military-led government calling 2016 "the year of investment" designed to mobilise capital for economic development.