Japan’s United Investments is teaming up with Military Bank member company MBCapital to create Vietnam’s first open-ended bond fund.
United Investments, which manages about $1.8 billion globally, is a member of Japan Asia Group.
The Tokyo-based firm would invest in the fund and have a co-ordinating role, Warit Kathong, vice president of United Investments, told VIR. Kathong did not reveal the amount of money involved.
The fund will focus on fixed-income assets including government and corporate bonds. Its founders hope to launch in the middle of this year.
With Vietnam’s equity market now among the best-performing in Asia and with the rosy long-term economic perspective, MBCapital’s portfolio manager Ngo Long Giang said he expected the firm’s Japanese partner would shift from investing in bonds in other Asian countries like Malaysia, the Philippines and Indonesia to Vietnam.
“What Vietnam is doing [in terms of managing its macroeconomy] now is quite good,” said Kathong. “Things are more positive than last year. The equity market is improving, property is improving and fixed-income market is improving as well.”
MBCapital and United Investments hope to attract investors by giving new investment access to local bond funds and provide stable returns. However, the idea of setting up bond funds in Vietnam comes at a time when the Vietnamese bond market remains in its infancy. Minor investors face a range of difficulties from the lack of a credit rating agency, the absence of benchmark yield curves and the small number of market makers available. Commercial banks remain the major players in this arena.
In addition, high dividend tax in Vietnam is still a big concern for foreign investment funds which are taxed 25 per cent on its income.
And with Vietnamese regulators having only activated the open-ended fund model in March, the local fund management industry says tax rules for investment funds need a revamp to encourage investors. Those rules have deterred VinaCapital, the largest asset manager by total net asset value in Vietnam, from setting up a proposed pension fund. The company was waiting for tax rule changes to realise its plans, said the company’s head of investment Andy Ho.
Kathong added he expected the local government could develop futures and derivatives, both necessary tools to help foreigners hedge risks in terms of currency movements. “As we are offshore investors, the movement of currencies is still our big concern. The VND has depreciated a great deal in the past.”
United Investments runs two funds investing in Vietnam with MBCapital. Its Vietnam-based Japan Asia Fund focuses on small- and medium-sized enterprises and their Japan-based Vietnam Dream Fund focuses on medium and large listed enterprises.