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.