Fintech, AI and innovation spur SCB Asset Management’s growth
- An industry leader in investment solutions is using cutting-edge tools to further its expansion among local and global investors
Country Business Reports interviews and articles by Discovery Reports
Among Asia’s hubs of economic and financial wealth, Thailand stands out as a promising hotspot for global investment. The country’s growing economy, low interest rates, relaxed regulations and strategic geography pose favourable conditions for investors eyeing the financially fertile markets of Asia.
With Thailand’s growing mutual funds industry valued at more than US$170 billion as of 2019, SCB Asset Management (SCBAM) is rapidly paving the way in innovative investment solutions for local and global investors looking to cash in on the country’s affluence.
Consistently outperforming the market through competently managed value-added funds with highly diversified risk, SCBAM proves its industry leadership through its own results-driven expertise. The leading portfolio manager increased its assets under management by nearly 3 per cent to US$47.28 billion at the end of 2021 from US$45.92 billion in 2020.
SCBAM has also been a recipient of numerous awards. It was recognised at The Asset Benchmark Research Awards 2020 as Thailand’s Most Astute Investor and Top Investment House, and as the country’s Best Asset Manager at the Alpha Southeast Asia Fund Management Awards 2021.
Gearing up for future growth, SCBAM is shifting its focus to data-driven analytics and digitalisation. It has invested in machine learning (ML) capabilities, automated portfolio management, social media and digital banking technologies.
“Our company has grown in many dimensions over the past five years,” says Narongsak Plodmechai, CEO. “Unlike in the past, where growth largely came from basic funds such as fixed income funds and money market funds, we have now successfully migrated clients into what we call high value-added funds. These have much better returns versus risks. When we started this segment in 2015, it comprised 15 per cent of our total assets. As of May 2022, it comprises nearly 40 per cent.”
As Thailand’s growing number of high-net-worth individuals (HNWI) and highly educated population increasingly turn to investment opportunities beyond fixed income funds and outside Thai borders, SCBAM continues to be a reliable and comprehensive partner of choice in sound fund management.
“Last year, we grew our foreign investment funds by nearly US$580 million which captured global stock markets expected to post high returns as the global economy had begun to recover” Narongsak says. “That’s how we want to move forward – as a leading Thai asset manager with an unshakeable reputation, a diverse roster of unique products and a successful track record that speaks for itself.”
Fund management DNA
Founded in 1992, SCBAM is Thailand’s largest mutual funds company and one of the country’s biggest and well-established asset management firms. Its major shareholder, Siam Commercial Bank, holds 99.99 per cent of the company’s shares.
SCBAM adheres to a strict code of ethics and to a management policy centred around the best interests of its investors. The company provides a full spectrum of investment management services that address HNWI and mass affluent client needs in Thailand.
These include the management of various kinds of mutual funds, private funds and provident funds across a range of investible assets. These span bank deposits, government debut securities, corporate debentures, equities, property and infrastructure funds in domestic and foreign markets.
“As a local fund manager creating our own products, we have a certain control that extends into everything we do,” Narongsak says. “We can solve the root causes of our problems and are better able to set expectations that create smoother experiences for the customer.”
SCBAM adopts a highly disciplined investment culture with prudent checks and balances. The company places great emphasis on being a flat organisation comprised of a diversely talented team. Its portfolio management philosophy is characterised by strategic and research-driven tactical asset allocation.
“Success requires the right competencies, which can be built by investing in the right people who can create value,” Narongsak says. “We have a mix of competencies within our company; 68 per cent of the organisation is also female, and the median age is 37 years old.”
SCBAM follows a rigid risk management policy. It carefully assesses operational risks arising from internal and external failures brought about by faulty systems, human error or unforeseen events. The company also evaluates market risks caused by changing interest rates and foreign exchange rates, as well as credit and liquidity risks.
“You have to learn and earn successes in the right competencies that will enable innovation,” Narongsak says. “You have to try things before they’re ever the right solutions. There are no quick wins and no ready-made solutions on the shelves that money can buy.”
Striking gold with big data, AI and fintech
From crowdfunding platforms and mobile banking apps to cryptocurrency exchanges and chatbot advisers, financial technologies (fintech) are radically disrupting the financial services industry.
Approximately 2.5 quintillion bytes of financial and customer data are generated globally daily from smartphones, laptops and other electronic devices. Artificial intelligence (AI) and ML – a branch of data science – are rapidly emerging as vital methods to analyse big data for useful applications.
ML algorithms use statistical models based on patterns, associations and trends found in large data sets to draw insights and make predictions. These create value by presenting cost-efficient financial solutions that increase productivity, optimise revenues and enhance user experiences.
These solutions include automating paperwork processes and customer service; performing credit-scoring and underwriting tasks; and improving network security through account monitoring and fraud detection. The technology also allows brokers to make better trading decisions by tracking and comparing stock prices.
“Technology and big data have allowed us to explore the non-linear and dynamic factors that create new possibilities – enabling us to reclassify funds in ways that are less prone to market capitalisation and offer do-it-yourself products to the market, for example,” Narongsak says.
As one of Thailand’s first movers in fintech and big data, SCBAM has already begun to incorporate ML into its asset management strategy.
Over the past five years, the company launched three mutual funds invested in Thailand and in global markets – SCB Machine Learning Thai Equity, SCB Global Machine Learning Equity and SCB Machine Learning China All Share. They all use innovative ML techniques developed in-house to support the selection of investment securities. A team of data scientists and engineers hired by SCBAM helped create the AI portfolio manager.
“The machine is the workhorse running the funds, with scalability, cost efficiency and value that will rise over time beyond our initial investment. We have a product on the ground that gives us real-world feedback and performance,” Narongsak says.
“The machine continues to learn every day – trained by new formulations, new techniques and new sets of conventional and unconventional data. We are confident that we have something others don’t and believe that we are a frontliner in this aspect.”
Engaging tomorrow’s customers today
With more than 700 SCB branches, electronic channels and sales agents providing optimal and convenient trading services for customers, SCBAM has also invested in online and mobile solutions for its growing clientele.
In 2018, the company launched its digital sandbox project called SCBAM Fund Click – a downloadable mobile app allowing investors to track their portfolios in real time and manage their funds directly.
The platform is also a way for young and inexperienced investors to gain experience. For as low as one baht, SCBAM Fund Click users can invest in equity with all management fees and service charges waived.
“Establishing the right digital banking culture takes time,” Narongsak says. “We have seen a slow migration in asset management between the physical bricks-and-mortar service set-up and the digital world. Even though transactions are increasing, it is quite clear that the volume remains in the physical space.”
“I hope that these digital platforms become a more immediate channel of client engagement and education – a way to keep investors invested and successful with us in the long run,” Narongsak says. “Even without these, our backyard remains fruitful. We can see our bricks-and-mortar channels still accommodating growth by seven to 10 per cent over the next two to three years.”
As asset managers increasingly look towards Southeast Asia for its high-potential revenue pools – found in sovereign funds, pension funds and onshore wealth in Thailand, Malaysia, Singapore and Brunei – the outlook for SCBAM looks promising.
With a rapidly growing smartphone penetration rate in Southeast Asia driven by younger and more financially literate consumers, the future of higher customer engagement in banking, finance and investment through smart devices becomes even more apparent.
“We’re determined to become Thailand’s top-of-mind asset manager offering uncompromised investments and professionally managed products with the assistance of technology and data,” Narongsak says. “The digital platform is not only important for tomorrow’s customers; today, it is where we can actually reach out to clients and continue creating a positive feedback experience.”