Vietcombank Fund Management, partly owned by the US’s Franklin Templeton Investments, will soon launch a balanced open-ended mutual fund, the first of its kind in Vietnam.
The VCBF Tactical Balanced Fund marks a significant development in the country’s financial sector. Regulators have been discussing introducing open-ended funds for years, but plans were sidelined following the 2008/2009 financial crisis.
Volatility, coupled with a lack of liquidity in the country’s closed-end mutual funds, the first of which launched in 2006, also killed investor appetite. But now the relevant framework and infrastructure is in for open-ended mutual funds to proceed.
The country’s State Securities Commission granted Ho Chi Minh City-based Vietcombank a fund certificate initial public offering licence on September 16, allowing the firm to raise money between October 14 and November 29. Both local and foreign investors can invest in the IPO.
The firm’s fund will launch soon after, although the firm has not yet determined a launch date.
The VCBF fund – a joint venture between Vietcombank and Franklin Templeton – will invest in both equities and fixed income. Its equity portfolio will mainly invest in large-cap growth and value stocks, while the fixed income portfolio will invest across government, municipal and high-quality listed corporate bonds.
Vietcombank FM says the fund will have the flexibility to take either “defensive or aggressive” positions depending on investment opportunities.
Deutsche Bank will act as the fund’s service provider.
Avinash Satwalekar, Vietcombank FM's CEO and CIO, says the current low-interest-rate environment, coupled with government policies to boost economic growth, have created a unique opportunity for investors.
Yet some market participants have said they expect take-up to be slow. Vietnam, like some other Southeast Asian countries, face an uphill battle in terms of investor education.
While mutual funds will provide much needed diversification to the Vietnamese retail community, it will still be challenging to convince the young population that a financial instrument can help with their long-term needs.
Vietnam’s GDP stood at $141.7 billion at the end of last year, according to the World Bank. Given that mutual funds in Asia typically account for 7-8% of a country’s GDP, this suggests Vietnam’s mutual funds industry could eventually reach $9-10 billion, if it is successful.
Other likely candidates to enter the open-ended mutual fund arena include Eastspring Investments, Manulife Asset Management and VietFund Management (a unit of Dragon Capital).