Foreign Investment Funds or FIF are mutual funds that invest abroad featuring investment policies that can vary across many assets such as fixed income, equities, oil, or gold. These funds provide the investor with the ability to earn higher potential returns compared with solely staying in the domestic market. They also help diversify one’s investment risks. Most of these funds tend to contain high to very-high risks since investing in assets in a foreign country exposes the investor to considerable market risk and foreign exchange rate risk; the amount of risk can vary depending on the extent of foreign-exchange risk hedging used.
Foreign Investment Funds represent the only fund category approved by the Securities and Exchange Commission and Bank of Thailand to mobilize funds from Thai investors for the purpose of investing in foreign assets overseas in an effort to diversify risks and enhance investment return by tapping foreign markets. There is a wide range of financial instruments and assets are available worldwide, offering varying levels of financial returns.
FIF funds can re-allocate investments from one country
to another country possessing better economic
and investment prospects.
As such, FIF funds tend to have high to very-high risk as there is exposure to both market risk and foreign-exchange risk. Some funds hedge against foreign-exchange risk to reduce this exposure. A FIF fund that specifically concentrates its investments in a single country is also highly risky as it is very susceptible to events in that market which could impact the fund. Allocating the portfolio across investments in many countries can help the fund diversify risks, whereby risk will be diversified according to weightings in various instruments and securities. FIF funds present an interesting choice for investors seeking a new type of investment or wish to diversify into foreign markets offering attractive returns.
Investors need to understand the risk of investing in a FIF fund because there is exposure to more risks than domestic funds. The risks of investing in a FIF fund include:
KTAM is truly a one-stop center for FIF funds. There’s a wide choice for investors given our vast range of different FIF funds. Some funds emphasize a particular geographical region that’s a fast growing emerging market while others may concentrate in sectors such as infrastructure, alternative energy, medicine and pharmaceuticals. Or even choose a fund that invests in innovative trends not yet available in Thailand.