VinaCapital Vietnam Opportunity (VOF) may fall under the radar for many investors, but the board of the specialist investment company is trying to change that.
The trust moved to a main London market listing last year, and a 69% rally in the trust's shares last year has also helped to alert investors.
Andy Ho, managing director of the fund's manager, VinaCapital, joined us in the Citywire studios to tell us more.
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Gavin Lumsden: Hello, with me today is Andy Ho, chief investment officer of VinaCapital Investment Management, which runs the VinaCapital Vietnam Opportunity Fund.
Andy, thanks for coming in. Now yours is one of the more specialist funds that we’ve covered. Can you tell us a bit about it?
Andy Ho: Well, VinaCapital Vietnam Opportunity Fund, which is VOF, we’re listed in the London main. Our fund offers investors access to Vietnam. The uniqueness of our fund relative to ETFs or other open-ended funds is that we focus primarily on private business before they go public and we help them create value, grow the business, and we either take them public like we just helped with the latest IPO which is a low-cost carrier called VietJet which went public on February 28, or we take some of these businesses through a trade sale. We’ve had more trade sales than any other fund in Southeast Asia for the last five years.
GL: Just looking at your performance Andy, you had an exciting 2016, the shares rose 69% in sterling terms and you moved the fund from Cayman Islands to Guernsey and upgraded your listing to the London full market. You’re trying to increase your visibility to investors.
AH: We’re finding that a lot of investors are interested in Vietnam, and unfortunately they are more comfortable with London main listed funds rather than AIM, particularly on the retail front, and we made a conscious decision a couple of years ago to migrate ourselves onto the London main.
GL: So what is the Vietnam story? It’s a communist country and yet there seem to be a wave of privatisations hitting the stock market. What’s going on?
AH: Structurally, Vietnam is going through a lot of changes and demographically it’s a very attractive place to invest. It’s got 95 million people, it’s growing GDP at 6% to 6.5% a year. The FX rate is relatively stable relative to other economies in the region, interest rates are quite stable and as a result businesses are growing. There’s a conscious effort to make state-owned enterprises into private businesses so they can compete: compete for resources, compete for customers, compete for businesses, making the usage of capital more efficient. That creates opportunities for us to invest in these private businesses, to invest in these state-owned enterprises.
GL: the story sounds good and the performance has been strong but nevertheless a lot of UK investors are going to ask: why should I take the risk of putting their money into a single country fund like yours rather than a general Asia fund?
AH: I certainly would invest in an Asia fund if you feel comfortable that the Asia fund has experienced people on the ground. What we feel is that, we look around Asia and we don’t see a whole lot of people that have experienced people, especially in Vietnam. What we provide is the expertise in a single country. We feel that if you invest in any business you ought to know the culture, the environment, the economy, the basics, the legal infrastructure. All that is necessary to make one investment and that’s what we have on the ground.
GL: Nevertheless this is a tricky time for emerging markets, if you look at the global picture. There’s the so-called Trump trade which is pulling money back to the States and pushing up the price of the dollar, and that’s creating a lot of uncertainty for emerging markets. What do you say to investors who are concerned about that?
AH: We’re not competing with the trades of China, Indonesia and therefore being caught up in these Trump discussions about imports and exports. We’re not. We’re growing a domestic economy that is creating wealth for individuals.
GL: You’re clearly very eloquent about the investment opportunity here Andy but it seems you do have a communication challenge to get this across to investors because the shares are trading at a discount of nearly 23% below net asset value. Clearly people are not convinced. What are you doing to change that?
AH: We are buying back the shares. We are using the profit that we generate from or investment. We spend about $50 million to $70 million a year. We could pay out a dividend but we use this money to buy the shares back and we have closed the discount back from 40-plus percent after the world financial crisis to about 20% today. Our commitment is to keep it very stable, so if we keep the discount stable and NAV goes up, share prices go up: it’s highly correlated. So if we spend a little bit more effort to close the discount, investors enjoy all that.
GL: yes, some of our investors know all about the attractions of discounts.
AH: The key is we have cash and we have profit to continue buying back the shares or giving back cash to shareholders.
GL: Well Andy, thanks very much, it’s a very interesting situation and we’ll watch the progress of the share price with interest.
AH: Thank you.