VietNamNet Bridge – While some foreign investment funds have had their operation extended in Vietnam, domestic funds are less lucky.

The anticipated death

Forty seven investment fund management companies have been licensed, which have been the funds with the minimum capital of 25 billion dong. Many of them have been managing two or more investment funds, while all of them have been incurring heavy losses during their operation.

Two management companies have been put under the special control for six months, namely the Huu Nghi Fund Management Company and Thanh Viet Fund Management Company, after they were found as unable to meet the requirements on financial security.

Like many other investment funds, SSIVF with the capital of 1.7 trillion dong was set up in 2007, when the Vietnamese stock market was at its peak. However, the business has been performing badly due to the sharp falls of the stock prices.

The dissolution of SSIVF was anticipated earlier this year, which has come true when the fund was officially closed on November 14.

Sacom, the second biggest capital contributor to SSIVF (280 billion dong), first expressed its intention to withdraw the investment capital.

Sacom’s General Director Do Van Trac said Sacom has got dividends and received back money totaling 240 billion dong, while the remaining money would come later after the fund sells all of its investment portfolios, either in cash or assets.

It is estimated that shareholders would get back some 90 percent of the initial investment values. This is considered the “light” losses if noting that the stock prices have fallen dramatically.

The representative of SSIVF said the closing of the fund has been scheduled; therefore, there has been no big difficulty in the liquidation of the portfolio.

The Viet Long fund managed by the Viet Long Securities Investment Company, which has the capital of 300 billion dong, is also following the procedures to close after five years of operation.

The investors’ conference of VF1 Fund managed by the Vietnam Investment Fund Company held earlier this year has also decided that the fund would close by early 2014 when it expires.

Investment quality will decide the life expectancy of the funds

Unlike foreign investment funds, domestic investment funds cannot persuade their shareholders to extend their operation. This has been attributed to the operation quality.

Sacom’s Trac has affirmed that Sacom would never contribute its capital to any more investment funds, saying that if Sacom can see investment opportunities, it would make investments itself.

Trac said he has found out that the fund operation is nearly the same with an individual investor.

Meanwhile, Vietnamese funds still have their problems, including the lack of flexibility and the lack of strict supervision mechanism. Investment funds cannot easily sell their investment portfolios. For example, SSIVF began selling its 1.2 million LAF shares earlier this year, but now it still holds 700,000 LAF. This has brought a big loss to SSIVF, if noting that LAF price dropped from 15,000 dong earlier this year to 3600 dong in November.

The dramatic decreases of the Vietnamese stock prices have been cited to explain the ineffective operation of domestic funds. However, Dr Le Dat Chi from the HCM City Economics University has pointed out that this should be blamed on the incapability of the board of management and the lack of the mechanism on supervising the information exposition.

Chi has warned that more domestic funds would leave the market if the stock market remains quiet, while it would be very difficult to raise new funds.

DNSG