VinaCapital, the asset management firm focusing on Vietnam, has launched one of the country’s first fixed income funds, the VinaCapital Vietnam Fix
VinaCapital, the asset management firm focusing on Vietnam, has launched one of the country’s first fixed income funds, the VinaCapital Vietnam Fixed Income Fund (VFIF).
VFIF is an open-ended fund, which aims to take advantage of current high interest rates to invest in an actively managed portfolio of sovereign, semi-sovereign and internationally rated corporate bonds issued in Vietnam.
There are very few options for international investors looking to invest in Vietnam’s debt market, which doubled in size during 2007 to reach a total of USD9.8 billion in bonds outstanding.
Vietnamese bonds currently command significantly higher spreads compared to LIBOR and US rates. Government bond yields have peaked at over 20 percent in recent months, with current yields hovering in the high-teens.
The fund will invest primarily in government bonds with sovereign risk (S&P BB rating), semi-sovereign risk (bonds issued by SOE) and top-tier deposits (USD and Vietnam Dong). Vietnam’s bond yields compare favourably to regional countries with similar credit ratings, such as the Philippines and Indonesia, where yields are lower at 7-10% and 10-12%, respectively.
VinaCapital has added Roy Fong as director of fixed income investments. Previously Roy has worked at commercial banks including SouthQuay Global Markets Ltd and London Forfaiting Co Ltd in Hong Kong, where he traded fixed income, convertible bonds, syndicated loans and derivatives.
The fund manager will be Andy Ho (see attached photo), VinaCapital’s head of investment. Andy is manager of the AIM-listed Vietnam Opportunity Fund, a diversified closed-end fund that has beaten the Vietnam Index 10 of the last 12 months. Previously, Andy was Director of Investment at Prudential Vietnam’s fund management company, where he helped launch two funds including the country’s largest domestic mutual fund.
Andy Ho says, “Vietnam is in a virtually unique situation as the Government’s tightening of monetary and credit policy, to control inflation, has resulted in corresponding rises in domestic interest rates, for both VND and USD deposits and consequently created a very attractive environment for investment in fixed income instruments. The bond market in Vietnam is emerging as a strong source of capital, as an alternative to the securities market.”
He adds, “We anticipate that this fund will prove attractive to a wide variety of investors given possible net returns from high yielding bonds alongside the potential for additional capital gains. Vietnam’s foreign debt is relatively low at approximately 25% of GDP and the currency is not freely traded, so we view the risk of currency downturn is relatively limited.”
