Aug. 21--The size of the mutual fund industry could grow to 20 percent of gross domestic product by the year-end, as public understanding of funds and personal investment has continued to grow.

Voravan Tarapoom, the president of the Association of Investment Management Companies, said total assets under management stood at 1.756 trillion baht, or 16.9 percent of GDP, in July.

"The industry has continued to grow steadily over the past several years. In 1993, when the industry started, assets under management were 205.99 billion baht, or 6.7 percent of GDP. As of the end of last year, assets were 1.533 trillion baht, or 19 percent of GDP," she said at the opening of a fund exhibition yesterday.

Mutual fund assets as a percentage of bank deposits has also increased, to 21.8 percent at the end of 2008 compared with a low of 2.4 percent in 1997 at the height of the Asian economic crisis.

Low interest rates, market deregulation and greater public understanding of fund investment has helped increase the fund industry, as have tax incentives for contributions to long-term equity and retirement mutual funds.

Mrs Voravan, also the managing director of BBL Asset Management, said 65.2 percent of total fund assets were held in fixed-income funds, with equity funds accounting for another 17.3 percent.

Foreign investment funds have become a popular asset class, as investors diversify risk by investing in overseas stocks, bonds and commodities.

The fund industry continues to have strong growth potential, Ms Voravan said. The AIMC expects net assets as a percent of GDP to reach 20 percent by the end of the year, with assets equal to 24 percent to 26 percent of bank deposits.

Mrs Voravan cautioned investors in local stocks to be wary of short-term corrections, as the main index has already risen by 40 percent since the beginning of the year. The SET index yesterday closed at 640.98 points, up 9.7, in trade worth 19.77 billion baht.

"Since the potential to benefit from further upside gains is quite narrow, cost averaging is one good way to help reduce the risk from market volatility," she said.

Cost averaging involves investing a set sum at regular intervals, regardless of the market price. Over time, the strategy helps average out the overall cost of investments, smoothing the impact of short-term gains and losses.

Mrs Voravan said investors concerned about risk should consider property funds as a long-term investment option. Yields can reach 8 percent per year, with values backed by collateral assets.

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