OREANDA-NEWS. Fitch Ratings (Thailand) has affirmed Thailand-based SCB Asset Management Co., Ltd's (SCBAM) National Asset Manager Rating at 'Highest Standards (tha)'. The Outlook is Stable.

KEY RATING DRIVERS
The affirmation of SCBAM's rating is driven by the company's long history of fund management, its established market position in Thailand, and its strong and committed shareholder - Siam Commercial Bank Public Company Limited (SCB; AA(tha)/Stable/F1+(tha)). SCBAM also benefits from its parent's distribution network and extensive resources in risk management, compliance, audit, and information technology (IT).

The rating also takes into account SCBAM's experienced senior management and investment staff. The rating is further supported by its solid control framework, formalised investment process, and extensive IT resources.

The main challenges facing SCBAM are increasing assets under management (AUM) as it tries to migrate clients towards complex products; ensuring smooth integration between the front office and the newly upgraded risk management system; sustaining performance of its equity funds; and maintaining growth momentum in new areas, such as REITs.

SCBAM's 'Highest Standards (tha)' rating is based on the following category scores:
Company: High
Controls: Highest
Investments: High
Operations: Highest
Technology: Highest

Asset manager operations in the 'Highest Standards' National Scale category demonstrate an operational framework that Fitch considers superior relative to domestic institutional standards.

Company: SCBAM benefits from stable ownership by its sole shareholder, SCB, which is fully committed to the asset management business and provides operational and financial support to SCBAM. SCBAM has a diverse range of mutual-fund products, including fixed-income funds, equity funds, index funds, asset allocation funds, commodity funds, foreign investment funds, and property and infrastructure funds. SCBAM's private funds are the largest in Thailand by AUM, while its provident funds are the third largest. SCBAM is also a leader in the property and infrastructure fund business.

SCBAM's senior management is generally experienced. Internal replacements by experienced senior staff have ensured management continuity following the recent resignation of department heads.

Controls: SCBAM's risk management and control framework is strong and governed by SCB, using the latter's expertise and extensive resources. Operational and investment risks are managed through close coordination between SCBAM's risk management committee and SCB's risk management division. Market risk management has recently been strengthened by an upgrade of its risk management system to a platform that meets global standards.

Investments: SCBAM's investment process is formalised, backed by sufficient investment resources, and marked by in-depth research, disciplined buy-and-sell processes, formal portfolio reviews and documentation of investment decisions. Investment decisions are derived from fundamental analysis, quantitative approaches, and the judicious use of external research and consultancy to support in-house views. While fixed-income investment remains the asset manager's strength, SCBAM is increasingly equipped to deliver complex products in the form of REITs, and asset-allocation, sector, country, and trigger funds.

Operations: SCBAM has sufficient operational resources to deal with volumes and complexities of trades, portfolios, and clients. This is supported by its technological resources and a team of experienced staff specialised by scope. Further system upgrades to its middle- and back-office systems in early 2016 will enhance its technological resources. SCBAM also benefits from a high level of system automations. Its communication and reporting to investors are systematic and consistent with regulations and market practice.

Technology: SCBAM benefits from SCB's extensive IT resources and a greater level of automation following upgrades to the front-office system in 2014 and risk-management systems in 2015. SCBAM aims to completely overhaul its back and middle-office systems related to operations in 2016.

SCBAM was incorporated in March 1992 and is the asset management arm of SCB. The company is the second-largest asset management company in Thailand, with AUM of THB1.0trn (USD29.6bn) at end-May 2015. SCBAM manages a diversified product portfolio with significant market share in mutual, private, and provident funds.

RATING SENSITIVITIES AND SURVEILLANCE
The rating is sensitive to material adverse changes to any of the key rating drivers, particularly weakened financial conditions, heightened staff turnover or deterioration of processes and policies. A material deviation from Fitch's guidelines for any key rating driver could result in a rating downgrade.