Prudential Vietnam Fund

Vietnam was 2006’s 2nd fastest growing economy, and the country is still consistently regarded as moving fast to surpass its ASEAN neighbors as a major investment destination.

Now, Prudential has launched a Vietnam fund. From the web: vir.com.vn/Client/VIR/index. … p&doc=8793

Does anyone have any views or experience with Vietnam? It would be nice to hear your views. My banker sent questions inquiring about it. I’ll share the answers here.

a) Is this fund just starting out or is it something like a “tap” issue to an existing entity?

This is a new fund launch, not an existing fund.

b) The charges are as follows: … only 2 fees involved
- 3% one time front end fee
- no exit fee
- every year, one fifth of any returns in excess of 8% p.a. (on a cumulative basis) is paid out as performance fee
- no other annual fee, i.e. the 2% p.a. management fee mentioned in the flyer does NOT apply

You are correct. There is the usual front end fee (2%). Then there is the management fee of 2% and performance fee (standard for Vietnam-related funds) deducted from NAV. No exit fee

c) The fund is closed-ended. No new money raised from the public after this period of solicitation. New investors can only buy existing shares in the secondary market.

Correct. It will be traded like a stock (via equity desk) but the fund managers can do secondary placement in future (like stocks as well).

d) The “stock” (in this fund) is traded daily like a stock. The price may be independent of actual NAV.

Yes. So there will be a fund NAV and there will be a market price. The market price can be at a premium or at a discount to the fund nav. The other Vietnam-related one is now trading at a 40+% premium so we do expect the Prudential one to trade at a premium when it is launched as well.

e) The fund will have an initial “life” of 7 years, i.e. will be wound up after that.

It may or may not be closed after 7 years. Depends on shareholders vote to either continue or close the fund in the 7th year.

f) How did ************ get his “target return of 15% to 20% p.a. over a rolling 3 year period”? Is this return net of the fees above?

Target return projections are net of fees. The target returns are the projections of the fund managers, not ***’s or ****’s.

g) What investments are already in or earmarked for inclusion in the portfolio? Typically, how fast are the funds being invested? How many companies are they looking at?

The fund managers expect to fully invest the funds over a 6 month period. There is no fixed number of companies so they will go where they find value as this is an opportunistic fund.

h) Will the fund pay out anything before it is wound up? Or are there only 2 cashflows involved for an investor: (i) cash out when he invests and (ii) cash receipt when he sells the “stock” or when it is finally retired.

Currently, there are no plans for dividend payout as the fund is focused on capital gains. There is only 1 cash inflow (when he invest, either now or when it is listed) and 1 cash outflow (when he sells/redeems the number of units initially invested on the equity market). There is no other cashflow.

(i) When is the deadline to invest, Dec. 18 / next Monday?

Last dateline to put in orders via fund desk at IPO is end of business next Monday. After the fund is listed, transactions go through equity desk. A benefit of investing now is the opportunity to invest at NAV whereas currently, other Vietnam-related funds are trading at a premium, although the funds may trade at premium or discount depending on strength of demand. Once launched, there is a possiblility that the Prudential would probably trade at a premium as well.

I’ve seen many funds appearing on Vietnam, and for the obvious reasons you have cited. But this isn’t Vietnam’s first flutter as the exciting new China, there was also the false start back in the nineites which burnt quite a few big investors.

However, people I have spoken to that deal directly with such things do seem more confident this time it is the real thing.

I saw a great fund inolving a basket of the country’s largest cap stocks quite recently. A nice way to play overall market growth. Minimum entry was US$10,000. Sorry, don;t have any details on that one.

HG

[quote=“Lingchen”]Vietnam was 2006’s 2nd fastest growing economy, and the country is still consistently regarded as moving fast to surpass its ASEAN neighbors as a major investment destination.

Now, Prudential has launched a Vietnam fund. From the web: vir.com.vn/Client/VIR/index. … p&doc=8793

Does anyone have any views or experience with Vietnam? It would be nice to hear your views. My banker sent questions inquiring about it. I’ll share the answers here.[/quote]
Interesting, thanks for the info. I am actually already invested by means of a certificate that tracks “the other” fund. Not cheap (couple of charges and no dividends being paid) but so far so good.
There is a new basket certificate by the Deutsche Bank (ISIN: DE000DB6GSC5) that invests only into companies that are listed at the stock exchange. Management fee just below 1% p.a. and the dividends are kept by Deutsche Bank. It’s cheaper but also more risky since there are currently only 10 companies in the basket.

[quote]
b) The charges are as follows: … only 2 fees involved
- 3% one time front end fee
- no exit fee
- every year, one fifth of any returns in excess of 8% p.a. (on a cumulative basis) is paid out as performance fee
- no other annual fee, i.e. the 2% p.a. management fee mentioned in the flyer does NOT apply

You are correct. There is the usual front end fee (2%). Then there is the management fee of 2% and performance fee (standard for Vietnam-related funds) deducted from NAV. No exit fee[/quote]
I don’t understand this - there seems to be a difference in what fees apply, even in the numbers itself, so why does it say ‘You are correct.’?

[quote]g) What investments are already in or earmarked for inclusion in the portfolio? Typically, how fast are the funds being invested? How many companies are they looking at?

The fund managers expect to fully invest the funds over a 6 month period. There is no fixed number of companies so they will go where they find value as this is an opportunistic fund.[/quote]
No details given. I wonder if they just pick from the stock market or also private equity, like the ************ (which would be the Vietnam Opportunity Fund ISIN:KYG9361G1010).

[quote]h) Will the fund pay out anything before it is wound up? Or are there only 2 cashflows involved for an investor: (i) cash out when he invests and (ii) cash receipt when he sells the “stock” or when it is finally retired.

Currently, there are no plans for dividend payout as the fund is focused on capital gains. There is only 1 cash inflow (when he invest, either now or when it is listed) and 1 cash outflow (when he sells/redeems the number of units initially invested on the equity market). There is no other cashflow.[/quote]
Hm. Does that mean dividens are re-invested or kept by Prudential?

As HGC mentions there are already some funds but many are closed and/or do not trade on the stock market, and thus are not suitable for private investors (unless you are filthy rich perhaps). Here is a website about one such fund with some interesting info about Vietnam (klick ‘Vietnam’): Mekong Capital

I love Vietnam for investment, but I wouldn’t give this fund/ETF any of my money.
4+% in fees? Next.

Thank you for the feedback and the suggestions for other funds

[quote=“Rascal”][quote]
b) The charges are as follows: … only 2 fees involved
- 3% one time front end fee
- no exit fee
- every year, one fifth of any returns in excess of 8% p.a. (on a cumulative basis) is paid out as performance fee
- no other annual fee, i.e. the 2% p.a. management fee mentioned in the flyer does NOT apply

You are correct. There is the usual front end fee (2%). Then there is the management fee of 2% and performance fee (standard for Vietnam-related funds) deducted from NAV. No exit fee[/quote]
I don’t understand this - there seems to be a difference in what fees apply, even in the numbers itself, so why does it say ‘You are correct.’?[/quote]

What is meant is that the banker is correct that there are only 2 fees - the entrance fee and the annual management fee. The entrance fee is 2% not 3%

[quote]

[quote]g) What investments are already in or earmarked for inclusion in the portfolio? Typically, how fast are the funds being invested? How many companies are they looking at?

The fund managers expect to fully invest the funds over a 6 month period. There is no fixed number of companies so they will go where they find value as this is an opportunistic fund.[/quote]
No details given. I wonder if they just pick from the stock market or also private equity, like the ************ (which would be the Vietnam Opportunity Fund ISIN:KYG9361G1010).[/quote]

Sorry, no - I blocked out the name of the analyst. But I’m happy to know what the alternatives are.

I’m curious - what is a more reasonable and available price for an emerging market or (specifically) Vietnam fund?

[quote=“jdsmith”]I love Vietnam for investment, but I wouldn’t give this fund/ETF any of my money.
4+% in fees? Next.[/quote]

I also like the future potential of Vietnam, one of the interesting point is they have just joined the WTO which should open their markets and help growth.

No problem with funds and fee’s, not looked but assume it is not an index fund but rather an equity fund, so their is some assumed value in the skill of stock picking, would be nice to get a profile of the fund manager to understand his experience as this greatly determines the expected return of the fund.

Would also want to confirm what is the performance fee as that will also take a nice cut of the profits.

Don’t get me wrong, I didn’t mean to suggest this as an alternative because that’s the fund which trades with a 40% premium that was mentioned. It’s also the most well-known because it’s the only one that is somewhat easily available.

My advise: do not buy the Vietnam Opportunity Fund due to the premium.

The way I read it there are 3 fees: entrance fee (2%), management fee (2%) and performance fee (see below).
I think your banker wrongly assumed there is no management fee and hence why the “correct” statement confused me.

No alternative fund for Vietnam as of now (that I know of). A non-fund alternative would be the certificate I mentioned.

This one:

Yep. I agree.

linchen wrote:[quote]
I’m curious - what is a more reasonable and available price for an emerging market or (specifically) Vietnam fund?[/quote]
No time for a search now, but as it’s an emeriging market, probably not many.

I use Vanguard index funds and they are very low fees; I think this kind of fund is managed. Another thing that puts me off it. Index funds rule.

I read the performance fee and the management fee to be one and the same. This why there are only 2 fees.

I think this is how this management/performance fee works

Year 1: the fund NAV rises 10% - so management/performance fee = 10 - 8 = 2% -> 2% * 25% = 0.5%

or

Year 1: the fund NAV rises 16% - so management/performance fee = 16 - 8 = 8% -> 8% * 25% = 2%

or

Year 1: the fund NAV rises 32% - so management/performance fee = 32 - 8 = 24% -> 24% * 25% = 6%

For the following year, does “(cumulative)” mean CAGR? So,

Year 1: the fund NAV rises 16%, so fee = 2% the first year
Year 2: the fund NAV rises further 10% (base for start of Year 1 = 116, so additional return is 11.6%, end of Y2, fund is at 127.2) or up 27.2%

So CAGR = 27.2 - so management/performance fee = 27.2 - 8 = 19.2% -> 19.2% * 25% = 4.8%

or

Year 1: the fund NAV rises 16%, so fee = 2% the first year
Year 2: the fund NAV rises further 16% (base for start of Year 1 = 116, so additional return is 34.56%, end of Y2, fund is at 134.56) or up 34.56% - so management/performance fee = 34.56 - 8 = 26.56% -> 26.56% * 25% = 6.64%

or

Year 1: the fund NAV rises 16%, so fee = 2% the first year
Year 2: the fund NAV rises 32% (base for start of Year 1 = 116, so additional return is 53.12%, end of Y2, fund is at 153.12) or up 53.12% - so management/performance fee = 53.12 - 8 = 145.12% -> 145.12% * 25% = 36.28%

Does this make sense? I think I’m way off now

I forgot to divide the CAGRs by the number of years!

Case 1: 27.2 / 2 = 13.6 -> 13.6 * 25% = 3.4%
So in the first year, you would pay 2% (set up) + 0.5% = 2.5%

Year 1 = 2.5%
Year 2 = 3.4%

Case 2: 34.56 / 2 = 17.28 -> 17.28 * 25% = 4.32%
So in the first year, you would pay 2% (set up) + 4% = 4%

Year 1 = 4%
Year 2 = 4.32%

Case 3: 53.12 / 2 = 26.56 -> 26.56 * 25% = 6.64%
So in the first year, you would pay 2% (set up) + 6% = 8%

Year 1 = 8%
Year 2 = 6.64%

Now, wouldn’t you be willing to pay 8% and 6.64% if you were earning 26.56% a year? Your still profiting 18.56% and 19.92% in each respective year

Uh huh, you gonna guarantee that 25% :wink:

The thing is, if if flops, you STILL pay those fees.

Give me an index fund, like the one I used to buy into Turkey’s stockmarket and I’m game, but not this.

Management fee and performance fee are not the same. Most mutual funds carry a management fee (beside the load / front end fee), but the performance fee is only sometimes imposed.
The managment fee (here fixed at 2%) is caculated into the price on a daily basis and not depending on the performance - even the fund drops 35% they will still charge you the 2% management fee.
The performance fee depends on certain criterias, in this case gaining more than 8%. One fifth of that difference is deducted in addition to any management fee.

Yeah, I gave up. :laughing:

If you think that way you will never get rich. :wink:

The thing is that you are already paying the management fee and there is no performance guarantee. If the market climbs 20% instead of 8% and the fund follows that closely, why would I want to pay a performance fee? Besides, you are not getting any money or paying less management fee (%) if the fund performs poorly.
If it would be an outperformance fee (i.e. the fund performs x % better than the market index) it would perhaps be acceptable, but to exceed 8% in Vietnam is not difficult at this time, in particular if you consider that the market more than doubled this year alone!

But of course, if there is no alternative and you want to invest there you may need to bite the bullet and have to pay any fee that’s imposed.
Note the comment about the stock market development though - it’s a hot (very risky) market, so don’t put all your savings in there!

You are right - I misread the fees part. There are indeed 2 annual fees. And I see that only the management fee is what you have to pay whether the fund NAV goes up or down. No “performance” fee if the fund doesn’t beat 8%

I understand what you mean about the outperformance fee. I guess the problem is that there aren’t any Vietnam funds that are not yet at a premium (NAV+40%) that offer outperformance fees

Let me ask something back at you - if the market climbs 20% instead of 8% and the fund follows that closely, and I’m offshore in Taiwan going to work every day, how else will I participate? Isn’t that what joining the mutual fund is for - so that I don’t have to watch the stocks or learn about the companies. I pick a concept, in this case that Vietnam’s boom will run another 3 mos, 6 mos or 2 years, and I beat my benchmark.

If my benchmark is the Ho Chi Index, then this is a silly argument. My benchmark is more likely whatever the bank is offering me, or my moneymarket account or T-bills, or EAFE or something like that. Maybe it’s just me, but it doesn’t seem so silly if you know what you need to beat.

Or do you mean that the money manager doesn’t really deserve the performance fee because in a 20% growth market (more in fact this year as you noted) they aren’t really working anyway. As long as I get my return (that I “beat my bogey”) I could careless how much they skim off. Because I don’t have an alternative anyway

Anyway, here is a little more from my banker for those who are still curious

How long is your recommended holding period?

Investing into emerging economies is for the long haul. Should have a view of 3-4 years at least. But having said that, with strong market sentiment and liquidity flows, I would definitely advise that client take profit should we see a reasonable return in 6 months (or even 3 months).

What is your personal opinion.too many funds being launched. are we too late? what are the plus for this fund.

There are not many Vietnam mutual funds being launched in the market at the moment. Most of the existing ones were launched previously by local Vietnam fund houses. The offshore ones are only starting out and Prudential, being in Vietnam for a no. of years with their insurance and asset management business growing rapidly is one of the rare offshore fundhouses with onshore offices to be able to launch a Vietnam fund (most of the offshore ones are not based in Vietnam).

Their market cap is very small, abt US$3 – 4 billion in size only, there is still a lot of room for growth.

Pls see attached price graph of the world’s best performing stock market this year. Ho Chi Min index is up 140% YTD, ahead of Shanghai & Shenzen’s close to 100%. There are no available PE’s in Bloomberg though.

Also, we have to hold it for how long or can we sell anytime after a certain date?

You can sell it once the fund gets listed on 22 Dec 2006 on the exchange.

[quote]How long is your recommended holding period?

Investing into emerging economies is for the long haul. Should have a view of 3-4 years at least. But having said that, with strong market sentiment and liquidity flows, I would definitely advise that client take profit should we see a reasonable return in 6 months (or even 3 months).

What is your personal opinion.too many funds being launched. are we too late? what are the plus for this fund.

There are not many Vietnam mutual funds being launched in the market at the moment. Most of the existing ones were launched previously by local Vietnam fund houses. The offshore ones are only starting out and Prudential, being in Vietnam for a no. of years with their insurance and asset management business growing rapidly is one of the rare offshore fundhouses with onshore offices to be able to launch a Vietnam fund (most of the offshore ones are not based in Vietnam).

Their market cap is very small, abt US$3 – 4 billion in size only, there is still a lot of room for growth.

Pls see attached price graph of the world’s best performing stock market this year. Ho Chi Min index is up 140% YTD, ahead of Shanghai & Shenzen’s close to 100%. There are no available PE’s in Bloomberg though.

Also, we have to hold it for how long or can we sell anytime after a certain date?

You can sell it once the fund gets listed on 22 Dec 2006 on the exchange.[/quote]

Your banker scares me.

Buying into an mutual fund to get out 6 months later? If you are American, you won’t even qualify for long term tax benefits (Taxed at 15%) because for that you need to wait a year to sell; add THAT to your hefty fees.

I own a couple indexes, vtsmx for myself and my son’s college fund, and a small cap index for him too. I plan to sell…never if I can help it.

I did own The Turkish Fund TKF for a few months, but I was daytrading then. I made my 20-25% and sold out at 12$. It went to 30$ and is now at about 18$. Your banker is telling you to trade a fund like a daytrader. Scary.

I agree with your banker about Vietnam as an investment gem in the rough though. But I will wait until there’s a nice fund of all the BIGGEST oil banks and telecom companies. Those are the ones that will still be there in 10 years. (This fund may already exist).

Why not get into an emerging markets’ fund that includes Vietnam?

Morgan stanley has a few: biz.yahoo.com/bw/061120/20061120006033.html?.v=1

If you keep poking your banker with questions, and letting him know what YOU want, he may stop trying to sell you something that will guarantee everyone but you makes a profit.

There is NO WAY I’d buy the fund you have on the table now. But, if there’s something better, I’d love to see it.

London had one listed, VOF.L but I know nothing about it.

Yep, you got it.

Outperformance fees are even rarer than performance fees. But don’t worry about that, as said in case of Vietnam there isn’t much choice anyhow and none offer an outperformance fee as far as I know.
Note that the premium is based on trading at the stock exchange, it has nothing to do with the fund management and their fees, it’s just that some people are so desperate to invest in Vietnam and want to buy that particular fund (due to lack of alternatives) that they are willing to pay nearly any price for it.

Sure, you can participate with a fund this way though usually you look at them long-term, not just for 3 or 6 months, better 5 years or more. However you also don’t want to spend more money than necessary on fees, so always observe those and check for alternatives; even a few % load (front end fee) can sometimes take months to recover, depending on the market you invest in. 2% isn’t that bad actually, I know one fund that takes a whooping 10% (though around 5% is more common). However I am getting smarter and I now buy funds with 100% discount on the load (via online brokers in my home country).

As jdsmith mentioned a better because cheaper alternative would be an Indexfund (most mutual funds do not beat the stock market index that’s their benchmark anyhow) but there isn’t one for the Vietnam index yet, so not an option unfortunately.

I see what you mean, i.e. if the bank offers you 3.5% interest then this could be your personal benchmark and anything better than that would be a good investment, not matter how high the fees. However note that the bank probably guarantees the interest rate and the amount you invested (e.g. in case of a fixed deposit) but a fund does not, in fact you can loose your money and the risk in emerging markets like Vietnam is even higher. And you must be willing to take that risk over the safety of an investment at your bank.

That’s what I meant (they are probably working but not doing anything that would make them deserve a performance fee).

But it only applies if you think about a positive return. The alternative would be not to invest. But you can of course invest, it’s your decision to make.
In case of the Prudential fund you could actually speculate on a possible premium, i.e. buy it now (from Prudential) and sell it at the stock exchange if it not only gains but also has a premium to it, then you can earn “double”.

That’s the one I mentioned before (with the 40% premium).

To be fair, what the analyst said was to consider taking profits in 3 or 6 months given how hot the market is. The recommendation in fact was to stay in for 3 to 4 years.

And you make a good point about US taxes. So unsurprisingly, many of the positions I take are those not sold to Americans. Obviously, mine is a “non-US account”.

[quote=“jdsmith”]Why not get into an emerging markets’ fund that includes Vietnam?

Morgan stanley has a few: biz.yahoo.com/bw/061120/20061120006033.html?.v=1

If you keep poking your banker with questions, and letting him know what YOU want, he may stop trying to sell you something that will guarantee everyone but you makes a profit.

There is NO WAY I’d buy the fund you have on the table now. But, if there’s something better, I’d love to see it.[/quote]

Why not indeed? Herein lies the difference in our perspectives, I suppose. Our contexts (investment goals) differ. You are as unaware of my overall portfolio as I was of yours - well, I know a little bit more of yours now :slight_smile:

I’m looking for ways to squeeze out a few more percentage points than this account is currently doing. I’m 80% in fixed income, so I know why I’m weighted down. I’ve asked to hear more about equities/equity-derived opportunities. Since my bankers are actually somewhat conservative, the account has usually only done structured notes linked to stocks.

Thanks - I didn’t know that this is typical. I’m only just getting back to watching the accounts and hope to be more inquisitive of my bankers.

I see what you mean, i.e. if the bank offers you 3.5% interest then this could be your personal benchmark and anything better than that would be a good investment, not matter how high the fees. However note that the bank probably guarantees the interest rate and the amount you invested (e.g. in case of a fixed deposit) but a fund does not, in fact you can loose your money and the risk in emerging markets like Vietnam is even higher. And you must be willing to take that risk over the safety of an investment at your bank.[/quote]

Yes - it does depend on one’s degree of risk loving.

But it only applies if you think about a positive return. The alternative would be not to invest. But you can of course invest, it’s your decision to make.[/quote]

This isn’t what I meant when I said there wasn’t an alternative. If my goal is to implement my concept (participate in the current Vietnam boom), then there isn’t a viable alternative.

I could always choose not to invest as you say, but that is a different discussion. Or at least, it isn’t what I was discussing. Does this mean we can both be right :slight_smile:

I don’t understand why this is a “double”. If I flip this on December 22 because its price pops up, isn’t this what I am after anyway by staying for 3 mos, 6 mos, 5 years? Certainly, if I get my 20 to 25% this month, I would likely cash out, or at least take profits right away.

Guys, sorry I missed this thread. I work for Pru and was in Vietnam until 18 months ago. I know the guys running the fund, the CEO of our funds company in Vietnam is a personal friend.

I can’t answer every question here but lets start with some basics.
I tried to get in pre-listing and the minimum in was US$100K which was too much for me
There are only currently 27 listed stocks on the Vietnam market (give or take)
The market is VERY illiquid
Pru is the biggest player in the market by far
The shares will be listed on the Irish market
I will buy some
Government bonds in Vietnam (b rated) pay approx. 9% so beating 8% is very probable
I am not sure of the currency risk on this product as all stocks will be denominated in Dong which is likeley to appreciate against the $ (even now)
I believe the fund invests in bonds and property as well as equity
I think this is a very real opportunity to get in before Vietnam becomes the next China. At the moment it is only private equity that has been allowed to play in the market and then onnly in very limited numbers
Vietnam is due for about US$7bn in foreign investment in 2007, which is up there with India and China
If you haven’t been, go and see the place it is awesome. The potential is huge.
WTO is opening up the financial sector and you will see more US firms in particular going into the market now that trade has been normalised
The government is planning to list more of the state owned companies

I can’t answer the technical questions about charges etc. but if you have any questions about Vietnam in general feel free to PM me as I don’t get to check here as often as I would like.

The title of this thread is certainly an attention grabber. There have been lots of news articles lately about the meteoric growth of Vietnam’s economy.

But, like others above, the management fees are too high for me to even consider it further. That and the likelihood of fraud, corruption, mismanagement and lack of transparency. The following is regarding China, but I don’t know why it should be any different in Vietnam.

[quote]Wave of Corruption Tarnishes China’s Extraordinary Growth

By David Barboza
New York Times
March 22, 2005

China has been shaken by a series of large-scale bank robberies in recent years, but they are not the Bonnie-and-Clyde type. These are inside jobs: top executives, branch managers, loan officers and thousands of everyday employees have been running off with billions in customers’ money. Consider what has happened in just the first two months of 2005. First, a branch manager at the Bank of China disappeared with more than $100 million in cash. A few weeks later, dozens of employees of another commercial bank were arrested for conspiring to steal nearly $1 billion. And then midlevel officials of the China Construction Bank fled with about $8 million.

There is no word yet whether any of the money has been recovered. But the chain of events underlines an ugly byproduct of China’s aggressive embrace of a freewheeling, get-rich-quick form of capitalism: a long-running wave of corporate and government corruption scandals. The financial scandal watch gained new prominence last week with news reports that Zhang Enzhao, the head of the China Construction Bank, resigned after a lawsuit accused him of having accepted a $1 million bribe from an American company, Alltel Information Services. The bank later issued a statement saying he resigned for “personal reasons.”

The scandals are by no means limited to banks. Since the early 1990’s, China’s modern robber barons have focused on all manner of state-run companies. Brokerage houses, government-controlled investment management firms and dozens of state-owned companies have been looted of billions, according to government investigators. The official media are filled with accounts of executives and public employees accused of embezzling money and sometimes gambling away those funds at border casinos.

With China awash in speculative money intended to fuel its economic boom, many corporate executives have turned greedy, and even low-level employees are engaging in self-dealing transactions and learning how to funnel millions of dollars into offshore accounts. “Corruption is pervasive in China,” said Larry Lang, a professor of finance at the Chinese University of Hong Kong. “A lot of state-owned companies have been simply stripped clean.”

Few experts say that the scandals will slow China’s roaring economic growth anytime soon. But economists and government officials worry that the glaring examples of fraud, bribery and embezzlement could badly hinder the development of the nation’s banking and financial systems, which desperately need to be modernized for China to become a full-fledged economic superpower. . . .[/quote]
globalpolicy.org/nations/lau … nishes.htm

This makes sense. But again, assuming one believe Vietnam is going to outperform, enough to beat one’s personal benchmark after fees - who cares how much the fund manager makes?

Here is a little more background on Vietnam lately for those who are interested. It is from Citibank’s Emerging Markets overview for 2007/2008 (November 27, 2006)

The analyst here is Moh Siong Sim (moh.siong.sim@citigroup.com)

[quote]Real Sector

Entry into the WTO should lock Vietnam onto the path of continuous reform that probably will lead to further improvement in the business climate crucial in attracting more FDI. Rising FDI should drive trade growth and absorb unemployment pressures from the agriculture sector. Public investment is also likely to pick up given Vietnam’s large infrastructure needs. We expect strong growth of 8% over the next two years.

Inflation

Despite a hike in the public-sector minimum wage, inflation will likely subside modestly on easing oil prices, reductions in import tariffs and decelerating credit growth. But excess banking liquidity tied to sharp increases in foreign reserves could pose a medium-term inflation risk if allowed to persist.

Monetary/Fiscal Policies

The interest rate cycle has peaked with inflation easing and the US Fed poised for a one-off rate cut in early 2Q07. But intensified competition for funds among the joint stock banks should keep VND deposit rates well supported. A precautionary motive for foreign reserve accumulation and the desire to maintain export competitiveness suggests a continued policy of gently depreciating the VND against the USD. Stabilizing oil prices after the run-up in recent years likely will limit the scope for a substantial increase in fiscal spending. Difficulties with assessing fiscal policy should ease with increased fiscal transparency.

External Sector

Exports could benefit from the post-WTO removal of quotas that limit textile exports to the US. As Vietnam lowers tariff barriers, import demand will likely pick up, while more FDI could mean stronger capital imports. An anticipated widening of the trade deficit should remain manageable, with significant FDI, remittance inflows and tourism receipts. Foreign reserves probably will continue to rise.

Other (e.g. Political) Developments

New political leadership likely will remain supportive of economic reform, but progress in this direction will still be measured and consensus-driven.

Issues to Watch/Key Risks

(1) Accelerating reforms, particularly in banking and state-owned enterprises;
(2) a build-up of excess liquidity rekindling rapid credit growth and heightening inflation risk; and
(3) a strengthening external position facilitates a move toward greater VND flexibility.[/quote]

[quote=“Lingchen”]This isn’t what I meant when I said there wasn’t an alternative. If my goal is to implement my concept (participate in the current Vietnam boom), then there isn’t a viable alternative.

I could always choose not to invest as you say, but that is a different discussion. Or at least, it isn’t what I was discussing. Does this mean we can both be right :slight_smile:[/quote]
I understand. And we can be both right. :slight_smile:

Not double as in twice that much (hence the " marks), just saying if the fund later trades at a premium you can make some additional gain (on top of the fund’s performance) from selling it at the stock exchange.

I think the problem is this: you may outperform your personal benchmark but what if the market goes up 50% and the fund only 30%? You are then paying a performance fee for a 20% underperformance. Of course you can be happy with the 30% minus performance fee, but it leaves a bad aftertaste.

Anyhow, I think it’s clear that you are not going to invest all your live savings, that you are keen to invest into Vietnam, you are aware of the risk and that there isn’t much choice beside the high-fee investments (which you are willing to pay) but there is also a huge growth potential, so go for it.