NEW PROPERTY FUNDS ON THE CARDS BY YEAR-END

       Assetmanagement companies are gearing up to launch several new property funds during the rest of this year, as their returns of 7-13 per cent, higher than deposit rates, have proved popular.
       The higher returns from property funds also generally beat inflation and have become an attractive alternative for longterm investors. However, experts recommend retail investors consider asset quality, level of professional management and liquidity in unit trust trading before deciding to invest.
       MFC Asset Management will introduce two new property funds worth a combined Bt3 billion. One will invest in office buildings and the other in goodsdistribution centres.
       BT Asset Management will launch a new "freehold" property fund by investing in hotels, which means investors have certain rights to the assets.
       Krung Thai Asset Management will also offer a new property fund investing in hotels and is now negotiating with a hotel operator in Phuket.
       SCB Asset Management (SCBAM) president Jotika Savanananda believes the combined size of property funds will continuously expand, because they are a longterm investment tool offering regular returns to investors.
       SCBAM is now proposing a plan to set up a new property fund of its own. Jotika said the plan consisted of four elements: management of the property assets must be in the bluechip league; the management structure must be free from conflicts of interest; property projects must have high liquidity; and the potential for longterm growth must be high and rentalpricing adjustment flexible in terms of inflation. Thus, management and asset quality are key.
       "We're focusing on good brand when we choose to invest in any asset. The management must be professional, and the return on investment should be inflationproof," Jotika said.
       Moreover, fund managers in general must give advice about which funds are suitable for investors of specific risk profiles.
       For example, a freehold property fund would provide less return per annum but offer an opportunity to gain from the sale of assets at the fund's maturity. But with leasehold property funds, investors would receive higher annual returns but not be able to gain from an asset sale.
       So far, annual returns on freehold property funds listed on the Stock Exchange of Thailand (SET) have been running at 78 per cent and that on leasehold property funds 10-13 per cent.
       Meanwhile, Siam Commercial Bank's Research Department predicts the policy rate will be stable until next year, when it will rise in the second half. Bankdeposit and lending rates will also increase in next year's second quarter after bank lending expands significantly in line with the economic recovery.
       BBL Asset Management senior executive Wasin Wattanaworakijkul said the trend of rising interest rates would not affect propertyfund growth. He believes investors will continue to place a high priority on property funds as a source of assets that provide longterm returns that surpass deposit and inflation rates.
       In November, BBL Asset Management will introduce a Bt1.5billion freehold property fund that invests in rental warehouses, with and expected annual return of 8 per cent.
       Wasin said the warehouse business was expected to expand in line with economic growth, because logisticsrelated industries would pick up.
       The Kingdom has a shortage of warehouses that operate at a high standard, and so the firm has chosen to invest in this kind of asset in the belief this type of business has good potential.
       Siam City Asset Management managing director Teeraphan Jittalarn said his company would soon launch a new property fund that invested in listed property funds or fund of funds. The company is now discussing with the Securities and Exchange Commission whether it is possible to set up such a fund. If so, it would help solve liquidity problems regarding listed property funds.
       Experts suggest considering different factors before investing in different types of property funds.
       For example, for property funds that invest in department stores, investors should consider details of rental areas and the rental contracts of each department store, along with economic conditions, locations and management capabilities.
       For property funds that invest in airports, investors are advised carefully to consider the tourism situation, airport traffic and even airport passenger fees.
       For property funds that invest in hotels, tourism, locations, reputation and management ability should be considered the most.
       For property funds that invest in factories, focus on rental fees, rental contracts, tenants, customer diversity and the overall investment situation.
       For property funds investing in office and residential buildings, apartments and dormitories, take a good look at rental fees, rental contracts and tenant turnover.
       Property funds listing on the SET so far this year include a Bt1.16-billion mutualfund project from the Sala@Sathorn Property Fund (SSPF) from Primavest Asset Management; mutual funds by the MFCStrategic Storage Fund, issued by MFC Asset Management and worth Bt608 million; and the Bt603million 101 Montri Storage Property Fund from BT Asset Management.

       "We're focusing on good brand when we choose to invest in any asset. The management must be professional, and the return on investment should be inflation-proof."