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Post by Fletchsmile on Nov 4, 2015 21:00:34 GMT 7
One of the themes that comes up again and again is generating a simple income yielding portfolio from Thailand - particularly in today's low interest rate environment where cash rates are poor. Could be just for supplementary income, fund school fees, live off in retirement or early retirement, or support people you care about after you're gone and no longer able to do so.
The main driver for me was being married with kids and after the odd health scare or two, it hit me a few years back that while I could generate good money from my investments offshore, onshore etc and actively do so, my wife probably couldn't manage these investments in the same way, so wouldn't get the same returns.
I thought this might be of interest to others as well so maybe we could share a few ideas, regardless of objectives.
I know many of us could find more efficient investments elsewhere offshore, but I want to focus mainly on key criteria of:
1) Available from Thailand 2) Simple and manageable - so once set up doesn't need much doing except collect the income and almost anyone could handle it even with very limited knowledge 3) Has a reasonable chance of lasting the course of time, so will grow to offset inflation at least partly, and not need to touch the capital 4) Diversified - so covers several asset classes of foreign and local equities and bonds, property, cash reserve all of which generate income 5) Address some of the currency risk that the income will be used in Thailand so some THB exposure is a must
So what are your ideas and thoughts on this?
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Post by rgs2001uk on Nov 4, 2015 21:25:23 GMT 7
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Post by Fletchsmile on Nov 4, 2015 21:30:52 GMT 7
To start the ball rolling here are some ideas we hold in my wife's name onshore.
1) Thai equities: yield 3% - 4%
- Krungsri Dividend LTF - UOB BigCap Dividend LTF
Brief Rationale:
I'm a big fan of equities the idea is to buy these funds and not touch the capital. Just have her collect the dividends. Over time the dividend income should grow and capital too to keep pace with inflation UOB pays dividends annually in May and Krungsri annually in November so they complement each other well in spreading out the income received Although they are LTFs and she's a non-tax payer she can still buy them. Just doesn't get any tax relief. If not claiming tax relief there is also no limit on what you can buy Both have appeared consistently in the Top 10 performer list for Thai equities over the years Denominated in THB available in Thailand and the underlying exposure is THB Expected yield would be 3% or so (perhaps even 4% or more) over long term. This is reasonable given historic yields on SET.
2) Mixed Global Equities, Bonds and some REITs - Yield > 4%
- Krungsri Global Income
Brief Rationale:
Denominated in THB and available onshore Invests/feeds into in JPM Global Income Fund - a solid reliable fund from a quality fund management house Underlying exposures are all mainly foreign and outside Thailand so well diversified away from local country specific risks Minimum investment THB 510,000 initial and then 2k thereafter Well diversified core fund covering a wide range of assets, equities, bonds, both developed and emerging markets and even some small REIT exposures, all of which which the manager will active manage according to economic conditions Specifically designed for generating income as a core fund in a portfolio
3) Property
- TMB Property Income Plus Fund - Yield 4% - 5% +
Brief Rationale
Available and denominated in THB Property exposure to diversify a little Invests in REITs around 50% in Singapore and 50% in Thailand. So about half the underlying is Thai property exposure and half Singapore focused (though not all) exposure with currency risk Provides an uplift in yield to 1) and 2) above I'm not comfortable picking individual Thai REITs but can accept broad basket managed by a professional to diversify that risk. For the Singapore REITs in the portfolio I hold several already myself so understand the underlying investments reasonably well
Additional Note: It's relatively new in our portfolio and am still seeing how it comes along. So we probably wouldn't put more than 10% in it at this stage
4) Global Bonds
- TMB Global Bond Fund around 4% yield
Brief Rationale
We have a fund which feeds into Templeton Global Market Bond Funds. We don't have the dividend paying version but may well switch to it later. We also hold a couple of variations of this from Singapore, and I've been Ok with it over the years which gives me comfort from the Thailand side. Available and denominated in THB Not exactly exciting but steady To be honest am not high conviction in this and now having the JPM fund in mixed asset class see less of a need for it, so again probably wouldn't put more than 10% Covers global bonds to diversify a bit using reputable name fund manager in this field
5) Thai bonds
- TBH haven't really found what I'm looking for here and haven't found a quality decent yield income paying fund with THB exposure, so it's a bit of a gap.
Would rather fill this gap than the global bond fund as otherwise have no Thai bond exposure.
At the moment we're filling this gap with THB cash
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That's a core part of where we are, and some ideas to share that may be of interest to others...
All these are investments I believe my wife could just hold and collect income from for quite some time without doing much if I wasn't here. Will also expand on some of them a bit later and add a few more thoughts.
Would like to hear also what others think and do ideas and suggestions?
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Post by rgs2001uk on Nov 4, 2015 21:36:06 GMT 7
^^^ Fletch, we have had this conversation before, we are both in the same boat. My mrs doesnt have a clue of what we talk, . One thing that p**ses me off about here, no trust funds. Money best left in the UK and drip feed to the mrs on a monthly basis. Thats before we even talk about what shes in line for from my company pensions. At least company pensions she understands.
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AyG
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Post by AyG on Nov 5, 2015 8:19:31 GMT 7
I recently set up a similar-ish portfolio for an elderly lady living in Thailand. She didn't want too much of her assets to be in Thailand, wanted to take 4%/year from income and capital whilst doing an annual rebalancing, and hates paying tax. Here's what I came up with after a lot of thought: Asset class | Allocation | | Implementation | Thailand Equities | 14% | | Fidelity Funds Thailand USD | Asia-Pacific Equities | 14% | | Schroder Oriental Income (SOI)
| Developed Markets Equities | 14% | | Witan (WTAN)
| Emerging Markets Equities | 8% | | JP Morgan Emerging Markets (JMG) | Infrastructure | 7.5% | | Utilico Emerging Markets (UEM) | Index-linked Bonds | 7.5% | | iShares Global Inflation Linked Government Bond (IGIL) | Emerging Markets Bonds | 7.5% | | iShares J.P. Morgan $ Emerging Markets Bond (IEMB) | Conventional Bonds | 7.5% |
| Henderson Diversified Income (HDIV) | Defensive | 19% |
| 50% Personal Assets (PNL) 50% Ruffer Investment Co. (RICA) |
(The total percentage is 99%, leaving cash to cover fees within the wrapper.) The Fidelity Funds Thailand is a compromise. At the time I couldn't buy Aberdeen New Thai (ANW) at an acceptable price. IGIL doesn't pay any income, which isn't ideal, but I couldn't find a suitable, income paying alternative. The implementation clearly reflects my usual preference for Investment Trusts for equity investments and ETFs for bond investments. (I generally don't believe bond managers add enough to justify their fees.) The forecast annual natural yield is 2.7%.
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AyG
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Post by AyG on Nov 6, 2015 12:14:14 GMT 7
I was curious to find out which are the highest yielding funds in Thailand. To my surprise, neither Morningstar Thailand nor WealthMagik provides yield data. Does anyone know of a site where when can screen funds by dividend yield? Thai language is OK.
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Post by Fletchsmile on Nov 10, 2015 14:19:59 GMT 7
Don't know a lot about this particular Property Fund to be honest. Just some cursory observations: I know ING were quite active in this space with funds, so that area of their business has passed to UOB. So it has a decent name behind it. Seems to be freehold which is preferable to leasehold, and trading at a significant discount - around 20% ball park - to net assets: price 8.85 vs NAV 10.97. GSB/Omsin holds 21% The div yield at just over 5% doesn't really stand out, and would generally expect more from Thai REITs - possibly a reflection of risk level, possibly not. While Thonglor is a decent area for porperty/ retail space / serviced apartments, it has a very narrow focus. So not something I'd want to plough a lot of money into. Might be worthwhile after doing more research and as part of a wider portfolio though as a small holding. Researching Thai REITs and property funds is quite time-consuming, and the info isn't always that transparent. I'd rather have a portfolio of REITs/ property funds, so that's why I'd go for something like TMBPIPF. Let someone else do all the really detailed work for Thailand, and have a better spread/ diversified portfolio. TMBPIPF would pay a similar ball park yield with a much wider portfolio spread as well as some of the quality Singapore REITs in addition to Thailand. It's something I'd feel comfortable the Mrs holding without needing to pay too much attention. For a single REIT/ property fund you'd need to keep an eye on it. The main disadvantage of TMBPIPF compared to this would be you pay an annual fee, whereas on UOB8TF you just buy it on the stock exchange and hold it without additional charges. I'd be more comfortable paying the annual management fee though to attain the lower risk and additional benefits.
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Post by rgs2001uk on Nov 10, 2015 14:38:56 GMT 7
^^^^, cheers thanks for that Fletch, thats a couple of pints I owe, please put them on Smokies bill, or if in usual haunt, Mr Toads.
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Post by Fletchsmile on Nov 10, 2015 14:46:08 GMT 7
^^^ Fletch, we have had this conversation before, we are both in the same boat. My mrs doesnt have a clue of what we talk, . One thing that p**ses me off about here, no trust funds. Money best left in the UK and drip feed to the mrs on a monthly basis. Thats before we even talk about what shes in line for from my company pensions. At least company pensions she understands. Yes I know not easy Even with a trust fund though, someone needs to administer it. You still have the currency risk and then you need to get the funds to Thailand etc. All admin hassle. That's why I started the funds in the opening post. They're all held in Thailand, a reasonable spread of the basics, reasonable yield (should be 4% or so) and can be largely just left - collect the income and don't touch the capital, which should also grow over time. That said, I still also maintain some assets in the UK. A portfolio of mainly unit trusts, not dissimilar to AYG. This is much easier to do in the UK than Thailand, with a much wider choice. The key differences there are: 1) I also have a UK will specifically for these UK assets 2) They go to my children as first Legatee, my wife is only second Legatee 3) My brother is specified in the will as controller of the property if I die while they are still minors My brother is a great guy, and I trust him totally. But finance isn't his strongest point. So again it's set up so he wouldn't need to do so much. More than just collect money, as in Thailand, as he knows more than the Mrs and I could expect him to make some decisions. But the key here is protecting the kids first and making sure there are some assets there for them secure and separate if anything happens to me, rather than the objectives of income producing for the Mrs. Also if all left in Thailand and something happened to my wife as well or she remarries etc etc then there could be issues. The Mrs. is First Legatee on the Thai will though, and kids second. So the idea is together Thailand investments support my wife and UK investments protect the kids. If I only had the wife there'd be less need to have the UK stuff. Only if something went pear shaped while I was alive and needed to go back
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AyG
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Post by AyG on Nov 11, 2015 11:31:39 GMT 7
I want to focus mainly on key criteria of: 1) Available from Thailand 2) Simple and manageable - so once set up doesn't need much doing except collect the income and almost anyone could handle it even with very limited knowledge 3) Has a reasonable chance of lasting the course of time, so will grow to offset inflation at least partly, and not need to touch the capital 4) Diversified - so covers several asset classes of foreign and local equities and bonds, property, cash reserve all of which generate income 5) Address some of the currency risk that the income will be used in Thailand so some THB exposure is a must So what are your ideas and thoughts on this? 1) Surely, pretty much the whole investment universe is available from Thailand, so one could well be better off with an offshore brokerage account than an onshore one. In fact, given the way that there aren't any fund platforms in Thailand, and that if one wants to buy a diversified range of funds one is pretty much forced to open multiple accounts, offshore seems to me the way to go. (Caveat: I haven't fully investigated any issues with Thai nationals owning offshore accounts, though Thaksin did so, so it's probably OK.) 2) Nothing is simple. I mentioned previously a portfolio I'd set up for an elderly woman. Almost immediately UEM issued subscription shares. A naive account holder might let them expire worthless, rather than, say, sell them. Not all investments are long lived. ETFs close. Funds change objective or are merged with other funds. Some get wound up. One needs to make sure that whoever is going to be monitoring the investments in the future understands asset allocation. I'd also add that "set up and leave" isn't the most prudent way forward: rebalancing enhances returns. 3) I think chasing income is not (all other things being equal) a good idea. At times of low interest rates the prices of income generative investments get pushed too high. As interest rates go up again (as they always do), capital values will fall. Certainly at the moment I wouldn't buy investment trusts such as HCIL which is trading at a 12% premium to NAV for just that reason. I believe one should be agnostic to capital gain or income. 4) Getting decent diversification in Thailand is tough. When I consider protection against inflation I think of (a) index linked bonds, and (b) infrastructure. The government has only ever made two index linked bond issues, and there's no diversified infrastructure funds available here AFAIK. As for investment in physical property, the individual equities are opaque and, frankly, too difficult to analyse. There's only one fund, TMBPIPF, where the fund managers do the analysis for you, and that isn't a pure Thailand play - roughly half the fund is invested in Singapore. Another reason to look offshore. 5) Yes, but what is the right percentage of THB exposure?
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Post by Fletchsmile on Nov 11, 2015 13:55:23 GMT 7
I hear what you're saying AyG. Key question though is how does that elderly foreign lady manage things from Thailand or my Thai wife or rgs Thai wife get on if we suddenly drop out of the picture? Some additional thoughts: 1) For offshore I'd agree there is a better and more efficient range of investments, which I make use of in UK and Singapore. Realistically though, if I'm not here, UK my brother could look after some for the kids. Singapore becomes a hassle. In addition to finding someone to trust and manage things there, knowledge of Thailand implications for a Thai national living in Thailand by Singaporeans is abysmal. That leaves Thailand as an essential. For platforms Thailand has been improving over the years. TMB has open architecture from a few fund management houses. Stan Chart a wider range of funds but poor platform. Kasikorn also a reasonable range of feeder funds. All the funds I mentioned above we bought from Stan Chart, so a single point of contact, despite multiple fund management groups. We also have a dedicated RM and/or the wife could just walk in and ask anything. That's much easier for my wife 2) For simplicity that's another reason why I like unit trusts. very little in the way of corporate actions. Even if a fund merges or swapped to another you just sit back and let it happen and own the new fund, all done at NAV. Shares would be a nightmare Rebalancing is a tough one. Who does it if I'm not around? The Krungsri/JPM fund plays an essential part as a core fund here as the fund manager should rebalance across asset classes as appropriate. This will partly address it for a significant part of the portfolio. The Thai equity fund managers and property fund managers should do within funds, but there will be some unaddressed balances between the funds - agreed. I can do that while here. if not here, there is a risk it becomes a little unbalanced, which is why the Krungrsi Fund is a key anchor 3) Would agree also on not chasing income. These pay what they pay and some years will be more and some less. However, I selected income units so there is then no worry about how much to buy and sell to generate funds to live off. For someone like us that knows what they're doing you can be indifferent between income and capital after bearing in mind tax. My wife wouldn't know how many capital units is appropriate to sell and how to rebalance a portfolio, hence take the decision out of her hands, and go for the dividend funds. Some points in the cycles they will be undervalued relative to say growth/value stocks and sometimes the opposite, over a long time horizon will largely balance out. Worth noting that in Thailand from a pure return point of view the capital/accumulation funds will be more efficient than income funds for large amounts. Dividends are taxable at a flat 10% or your marginal rate (after above the nil rate bank and allowances) so come with a cost in return for that convenience. 4) On diversification you're right. With the funds above it covers the main asset classes. Infrastructure probably wouldn't be more than 5% or 10% even if available. Index-linked bonds would be within the Krungsri fund if appropriate. I like that TMBPIPF is not all in Thailand and half/half roughly Singapore/Thailand. Gives diversification So all in all the funds mentioned are by no means perfect or a complete solution. On the other hand they're very easy to manage, simple funds which crudely cover the basics, and easily do-able form a single source/ point of contact in Thailand. Allocation between the funds is also a good question
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Post by Fletchsmile on Nov 11, 2015 16:02:41 GMT 7
Another thing I'm uncomfortable with offshore holdings is rule changes and cross border tax/ complexities in addition to the admin. While I can sit and analyse them, very few people offshore understand the Thai perspectives and few Thais understand what goes on in UK/ Singapore investments. Throw in a third jurisdiction and life gets overly complicated
eg a few months back Stan Chart Singapore told us they would no longer be allowing a W8BEN to reduce US WHT to 15% for foreigners. So now we suffer the 30% default rate of US WHT, and I had to change some of the investments. Your average advisor outside Thailand would just do nothing for someone in Thailand.
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Post by Fletchsmile on Jan 20, 2016 14:41:52 GMT 7
For the Krungrsi-Income Fund I mentioned (KF-INCOME) we've held it in my wife's name for almost a year, and it's one of the newer funds we hold. I'd been looking at how it had performed, so thought it worth a quick update, with some brief comments, as it's always worth looking back and seeing if funds have been achieving their objectives. Remembering the objectives were as below, and it's the return(and risk) in THB terms, as an income generating asset, as part of a portfolio for my wife, who doesn't have the experience to go offshore. In the last year it's ticked the first 4 boxes. I've been particularly pleased that it's been generating just over 4% income p.a. (after charges) in THB terms, and has still grown a little in capital terms since we invested, even in a very tough 12 months. This is in a market where most equity market indices are down over the same 12 month period, eg SET, S&P etc. 4% is a pretty standard "take-out rate" for portfolios, when looking how much is "safe" to take out and "survival rates" for the test of time. The "income" is received monthly via auto-redemption of units, and automatically switching some to cash units which could be sold. This is tax efficient for Thailand, although adds a little to the admin side, as you then need to sell the cash units. It's shown itself to be quite robust and defensive in THB terms in some difficult times. That performance includes the significant drops in the last couple of weeks or so to today, at the start of this year. Because it's invested mainly outside Thailand it does have currency risk for someone living in Thailand, who has mainly THB expenses. That's why a portfolio is needed, and that's what some of the other funds are for. An interesting twist to this though is that one of the reasons it has probably done relatively well, and been defensive is its USD exposure, as well as its bond and other asset classes exposure. In tough times, people often retreat to USD, and no doubt it has benefited from this. The USD/THB exchange rate has therefore benefited the THB returns. It's likely that long term whenever there are difficult periods this behaviour would repeat to an extent. (The opposite of course is that in strong markets where THB strengthens it may not perform relatively as well. But again that's why a portfolio should be diversified) So based on the last year, and some difficult times in the markets, the fund has met its objectives well. I see this as an important and core part of our simple income yielding portfolio in Thailand, which not only provides diversification, but also has useful defensive properties too.www.krungsriasset.com/EN/pdf/FFS_KF-INCOME_EN.pdf
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Post by Fletchsmile on Mar 16, 2016 14:56:06 GMT 7
Just revisiting this in light of the additional info on TMB Property income fund, and the way Thai mutual funds/ unit trusts pay out dividends bigmango.boards.net/thread/4558/tmbam-property-income-plus-dividend?page=1&scrollTo=67624Kind of comforting to know that there's restrictions on distributions if overall returns are negative, or if units drop below a certain level. This would mean less likelihood of a shock on selling for an inexperienced investor. I remember a couple of years back helping out an aunt in the UK who had some investments set up for her after her husband died by some "advisor". She had some issues with it. When I looked into it, worse still I found that the returns she'd been getting were largely coming out of capital. Because of market falls and the fee structure, returns she made from there on in were likely to do little more than cover fees. Of the funds mentioned above I'm still comfortable with them. Thai equities + global mixed fund + property fund in particular forming core parts of an income generating portfolio that can be held long term, with a decent income yield. Still haven't really found what I'm looking for for local Thai bonds though, so fill that gap with cash
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AyG
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Post by AyG on Mar 16, 2016 15:04:28 GMT 7
Still haven't really found what I'm looking for for local Thai bonds though, so fill that gap with cash If I were to invest at the moment in the Thai bond market I would be concerned about the inevitability of capital losses if (or rather, when) interest rates start to rise. This would push me towards short maturity bonds. I was therefore interested when TMBAM launched its Ultrashort Bond Fund (not for myself but for someone else). The information provided (both in Thai and English) is hopelessly lacking so I didn't take it further. It might, however, be right for some, the expectation being that it will do somewhat better than cash. Factsheet at: www.tmbam.com/pdfs/t06_03_en.pdf
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