Vietnam is about to experience the first liquidation of a fund since the country opened its stock exchanges in 2000.

Indochina Capital Vietnam Holdings, a unit of Ho Chi Minh City-based Indochina Capital Group, represents a closed-end Vietnam equities fund listed on the London Stock Exchange. The fund is managed by Indochina Capital Advisors. Its shareholders held an extraordinary general meeting yesterday to consider a proposal from its board of directors to split the shares, a move that would have seen part of the fund liquidated and the rest managed by Dragon Capital (also based in HCMC).

The board needed more than 35% of shareholders to agree, but in the end, over 98% of the votes gave the board the thumbs down. Now the entire fund is to be liquidated and shareholders paid back from whatever proceeds are realised.

Indochina Capital Group continues to operate three real-estate funds with a combined capital of $450 million, as well as another $50 million in equities via segregated accounts and funds managed on behalf of Japanese retail investors.

These other equity investments are older than the London-listed fund, having begun investing in 2005. The London-listed fund started in 2007, once Vietnam's equity bull run was underway, and when it crashed in 2008, performance suffered, prompting investor unrest.

However, some people familiar with Indochina Capital say the firm was unable to secure an experienced CIO with equities experience. Indochina Capital Group's founders - Peter Ryder, Rick Mayo-Smith and Nguyen Tung-Kim - are experts in real estate and private equity, and don't have the same background in listed equities.

Last year saw turnover, with one investment professional leaving for medical reasons. Shareholders encouraged Terry Mahony, an experienced equities manager, to take on an interim CIO role in 2008, but he declined to renew his contract. Other potential managers came and left.

Meanwhile, the 55% drop in the Vietnam stock market, coupled with the impact of the rising US dollar against the dong following the collapse of Lehman Brothers, hurt investors. Indochina Capital defends its performance, saying it beat the Vietnam Index. The fact that shareholders approved Indochina Capital Advisors to oversee the liquidation proves investors trust the management team, argues Beat Schuerch, equities director at Indochina Capital Advisers in Ho Chi Minh City.

Arbitrage hedge funds pressured the board of Indochina Capital Vietnam Holdings that a broader and deeper investment team be put in place. The board therefore supported the proposal by Indochina Capital Advisors to form a joint venture with Dragon Capital, another HCMC-based investment group, in which Dragon Capital would run the investment management of the continuation portfolio. This solution, when put to shareholders this week, was rejected in favour of a complete wind-down of the fund.

Some observers wonder if Indochina Capital Vietnam Holdings became a target of hedge funds once its listed share price traded at a discount to NAV as severe as 68% late last year. Since March, the Vietnam stock market has enjoyed a surge and is now looking frothy. Some arbitrage funds may have sought in November and December to browbeat the board into allowing a partial liquidation, so they could cash out now and immediately reinvest in the fund when its discount to NAV was still large, and enjoy the ride back up.

A victim of hedge funds -- or a victim of its own poor performance when it came to managing listed equities? Either way, the LSE-listed fund is now history. Indochina Capital Group says its real estate funds continue to perform well and have attracted new capital this year.