VN's fund management sector on the rise

Thursday, Jan 22, 2015 14:35

Since 2012, most closed-end funds have been transformed into open-end funds. In past year, 15 new open-end funds have been created. — Photo ndh

HA NOI (Biz Hub) — Fund management service was born in Viet Nam in 2003 with the establishment of VietFund Management (VFM), a joint venture created by Dragon Capital and Sacombank.

Following VFM, MB Capital, SSI Asset Management (SSIAM), Vietcombank Fund, Vinawealth and Eastspring Investment joined the trend.

More than a decade later, the country has about 43 fund management companies, making VND3 trillion (US$140.8 million) in charter capital and VND107 trillion ($5 billion) in entrusted assets. They are joined by 26 investment funds, broken down as follows: 15 open-end funds, two exchange-traded funds (ETF), eight private funds and one closed-end fund.

Investment fund sectors usually start slow and grows rapidly when they gains investors' trust. In Viet Nam, it has only been three years since guidance on open-end funds and ETFs was established, but a substantial amount of progress has already been made.

Since 2012, most closed-end funds have been transformed into open-end funds. In past year, 15 new open-end funds have been created.

In the second half of 2014 alone, Viet Nam made its own ETFs: the E1VFVN30, managed by VFM and listed on the HCM City Stock Exchange; and SSIAMHNX30, managed by SSIAM and listed on the Ha Noi Stock Exchange.

The sector is gradually forming a professional investor base, contributing to a more sustainable stock market. It is also aligned with international practices. The proportion of funds that are open in Indonesia is 99 per cent. Malaysia is 97.96 per cent open and Japan is 96.14 per cent, according to the State Securities Commission.

The Vietnamese capital market is expected to welcome three more types of funds: securities investment trusts, real estate investment trusts (REIT) and pension funds.

The legal frameworks for setting up the first two types of funds are in place. Circular 228/2012/TT-BTC gives guidance on establishing REIT, while Circular 227/2012/TT-BTC clarifies the funding for and management of securities investment companies.

At the Vietnam Business Forum at the end of last month, a capital market working group asked the Government to issue detailed guidelines for the creation of pension funds. This would provide more investment tools and improve social welfare, the working group said.

However, the new generation of funds needs time to prove its attractiveness to the public, especially when individual investors are still hesitating.

During a meeting with the Hanoi Stock Exchange and FPT Securities Company on the benefits of ETF, a local investor said he only came to learn about what an ETF was, and he had no intention of investing yet. The meeting is among a chain of events securities authorities are holding to train investors on how new market products work.

The Ministry of Finance released two circulars in 2012 to speed up the restructuring of the fund management industry. They have also increased watchdog organisations' abilities to control money flow between the banking and insurance sectors. In addition, the State Securities Commission issued documents about risk management activities and regulations on quality assessment with the CAMELS criteria: Capital adequacy, Asset quality, Management quality, Earnings, Liquidity and Sensitivity to market risk.

Six fund management companies have been forced to close as of October 2014, as part of the restructuring program.

To continue the program, which runs from 2011 to 2020, the Ministry of Finance is encouraging insurers, credit institutions and international financial organisations to contribute capital to and purchase shares of fund management firms. — VNS

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