(Tiểu luận) topic fund management companies andinvestment funds in viet nam

NATIONAL ECONOMICS UNIVERSITY -ooOoo - GROUP ASSIGNMENT TOPIC: FUND MANAGEMENT COMPANIES AND INVESTMENT FUNDS IN VIET NAM Class: Subject: Group: Leader: Members: Corporate Finance 63C – EEP Security Market Dinh Hue Phuong Luong Dang Tu Linh Nguyen Thi Quynh Anh Le Minh Duyen Luong Nhat Minh Phung Thanh Thao Tran Thi Minh Hanh Tran Le Vy Ha Noi, 2023 Table of Contents A Fund Management Companies in Vietnam I Current situation in Vietnam Establishment conditions Situation through each stage II B Evaluations Achievements Shortcomings and limitations 12 Solutions 14 Investment Funds in Vietnam 18 I Current situation in Vietnam 18 Classifications of investment funds 18 Investment funds throughout stages 20 II Evaluation 23 Achievements 23 Limitations and reasons 24 Solutions 27 References 27 A Fund Management Companies in Vietnam I Current situation in Vietnam Establishment conditions The Fund management company is also one of the entities subject to conditional business operations This means that in order to establish and operate, a fund management company must meet the legal requirements, which include requirements related to physical infrastructure, equipment, personnel, and capital  Capital Requirements: FMCs when establishing must meet a minimum charter capital requirement of 25 billion VND  Personnel Requirements: The key personnel conditions at the FMCs are highly significant, and state regulatory authorities have specific requirements for the positions of Director (General Director) and Deputy Director (Deputy General Director) responsible for operational functions (if applicable), which must comply with the regulations concerning: - Behavioral competence, no legal violations - Experience in the financial, banking, insurance sector - Professional certifications as required - Professional ethics compliance Furthermore, the FMCs is required to have a minimum of professional staff members with fund management professional certification  Infrastructure Requirements: Due to the nature of FMCs activities, which heavily rely on the development of information technology systems, the physical infrastructure requirements for FMCs will primarily focus on safety, data security, and various software systems The FMCs must meet requirements related to physical infrastructure, technical aspects, office equipment, computer systems, software for investment analysis, risk analysis, and management, as well as secure storage and preservation of records, documents, and devices ensuring safety and security for the company's working headquarters Additionally, the company's headquarters must also comply with regulatory requirements  Shareholders/ Capital contributors Requirements: According to the regulations in Vietnam, when establishing a FMCs, compliance with personnel requirements is required for founding members, individuals, and organizations, specifically as follows: For individuals, they must have full legal capacity, not be subject to imprisonment, or have their business activities restricted by a court order In the case of legal entities, they must operate legally and have the financial capacity to contribute capital Shareholder/Member Structure Requirements: There must be a minimum of two founding shareholders/members who are organizations meeting the financial and operational duration requirements The founding shareholders/members, who are organizations, must own a minimum of 65% of the charter capital, with insurance companies, commercial banks, and securities companies owning at least 30% of the charter capital In the case of a company limited, the owner must be an insurance company, commercial bank, or securities company Situation through each stage (Source: Vfin) In the ten years from 2011 to 2020, Vietnam has had outstanding development in the fund management industry, both in quantity and quality Specifically, the issuance of new fund types (i.e open-end funds and ETFs) marked an important milestone in the asset management industry In Vietnam, FMCs belonging to insurance companies manage a significant proportion of the total industry AUM (77%) while 65% of AUM is managed by foreign FMCs -Total AUM managed by FMC has grown dramatically over the past decade From 2011 to 2020, the AUM of the fund management industry grew at an average rate of 16%/year: While all FMCs managed AUM at VND 98,58 billion in 2011, total Recommended for you Document continues below Questions of Chapter - pldc Pháp luật đại cương 100% (1) 11190346 Nguyễn Quỳnh Anh Service Services Marketing 100% (1) Câu hỏi ôn tập chương pháp luật… Pháp luật đại cương 100% (3) Btvn Nguyễn Thị Thu Trang Pháp luật đại cương 100% (2) AUM reached approximately VND 430 billion in 2020 Net asset value (NAV) reached about 57 billion VND, causing an increase of 15.3% in AUM Currently there are about 44 fund management companies operating in the Vietnamese market  Stage (2011 - 2013): The growth of the fund management industry can be considered relatively fast, but is still modest compared to the development potential and needs of Vietnam's stock market During this period, the number of FMCs decreased slightly while ROE and profits skyrocketed in 2013 From the time the first securities investment fund was licensed to be established in May 2004 to December 31, 2012, there were 13 companies managing 23 investment funds, including 17 member funds and 06 funds public funds (public funds are all listed on the Ho Chi Minh City Stock Exchange (PRUBF1, MAFPF1, VF1,VF4, VFA, ACBGF) Total net asset value (NAV) of Funds as of December 31, 2012 were VND more than billion, accounting for about 10% of total assets under management In addition, FMCs also perform investment portfolio management activities for domestic and foreign organizations and individuals As of December 31, 2012, the total number of investment portfolio management contracts for domestic and foreign organizations and individuals was 307 contracts with the size of entrusted capital being 77,146 billion VND Thus, as of December 31, 2012, FMCs managed a volume of assets of about 86,669 billion VND (equivalent to more than billion USD)  Stage ( 2014 - 2015): Period of testing the endurance of fund management companies During this period, only the number of companies and portfolio managements continued to increase slightly For important indicators such as: profit, profit, ROE, NAV and AUM were all very modest In particular, 2014 saw a slight decrease in NAV compared to 2013 According to assessments of FMCs, 2014 will be the most difficult year for FMCs since the establishment of the industry (2003) until now This will also be a particularly difficult year in terms of revenue for the vast majority of companies in the industry when the operating cycle of closed-end funds has ended and funds operating under the open fund model have not had the necessary growth to have enough revenue to cover management costs along with the general market situation does not indicate the possibility of significant changes in the investment trust assets In addition, regularly carrying out capital mobilization activities for open funds will increase the fund management company's costs compared to previous times Thus, the years 2014 and 2015 may be a period of testing the endurance of FMCs and will also be the period where there will be "acid tests", the harshest challenges, for existing and upcoming funds in the world market Apart from a minority of FMCs that have entrusted funds from the parent corporation, the majority of companies in the industry will face this challenging period  Stage (2016 – 2020): The activities of fund management companies have grown significantly during this period, however the proportion of fund size is only quite small in stock market capitalization at the end of 2021 In recent years, the securities investment fund management industry in Vietnam has matured rapidly and achieved many important milestones In years, all indexes increased sharply: - Profits of fund management companies only reached 108 billion VND in 2015, but reached 585 billion VND in 2020, an increase of more than times - In addition, ROE increased approximately times Two important indicators like NAV, AUM all increased (NAV growth extremely strongly: times more from only 6989 billion VND in 2015 to about 58000 billion VND in 2020) As of the end of 2020, the total value of assets under management of fund management companies accounted for only 5.5% of Vietnam's GDP However, the ratio of the value of assets under management of fund management companies to Vietnam's GDP is smaller than that of some countries in the region (0.05% compared to 27% average in the world) In contrast, 2018 saw a decline in profits and ROE II Evaluations Achievements  Phase (2011 – 2013): Key aspects: The growth of the fund management industry can be considered relatively fast - With the stable growth of fund management companies, the entire industry had high profits after tax and revenue in 2013, with an estimated after-tax profit of 70 billion dong and revenue of 600 billion dong - During this phase, many fund management companies developed existing investment portfolios and also sought new entrusted investors Among them, SSI Asset Management Company (SSIAM) achieved that, with SSIAM's total assets increasing by 13% compared to 2011, and pre-tax profit increasing by more than three times compared to 2011 Reasons: - Foreign capital inflow: Thanks to the strong push of foreign capital inflows, especially from two Index Funds (ETFs), it made the stock market increase significantly in 2013 Investors bought a net amount of 42 million USD worth of stocks in more than 10 days at the beginning of the year - Legal documents issued: The fund management industry had a lot of development in 2013 when legal documents opened the way for new products to be issued such as open-end funds, or upcoming products like ETFs, retirement funds, real estate funds, and securities investment companies Impact of these advantages on the stock market and the Vietnamese economy: - Economic growth: The VN-Index of the Vietnamese stock market increased significantly in 2013, contributing to the development of the Vietnamese economy in general The question is, with such a hard time making a profit, why don't the investors in fund management companies give up and find other ways to survive? Why the number of companies continue to increase despite declining profits and ROE? Although there are no specific legal regulations, as an unwritten law, the State Securities Commission does not issue licenses for fund management companies Fund management companies hope that with new policy initiatives in the future, the opportunity to make a profit will become more open  Phase 3: 2016-2020 In 2018, fund management companies faced many challenges such as strongmarket fluctuations, sudden capital withdrawals from investors, and fierce competition from other fund management companies - Unstable stock market: In 2018, the Vietnamese stock market went through many fluctuations, especially the sharp ups and downs of the VN-Index in Q1 and Q4, which made investment funds face difficulties - New regulations on fund management: In 2018, the government issued Decree 58/2018 on public investment fund management with many new regulations This change forced many fund management companies to retrain employees, change management methods, and incur many costs - Low interest rates: The deposit interest rates from banks became lower, causing many investment funds to shift to other investment channels such as real estate, cryptocurrencies This has affected the deposit volume in funds and reduced profits In 2019, in the context of the stock market being stagnant, fund management companies also struggled to make a profit - The stock index remained stagnant in the first half of the year (ending the first six months of 2019, VN-Index stopped at 949.94 points, equivalent to an increase of 6.43% compared to the end of 2018; HNX-Index slightly decreased by 0.69%, down to 104.09 points), leading top fund management companies to have a hard time making a profit - In the companies that have announced financial statements, half of them either experienced a decrease in profits or continued to incur losses Solutions  Improving the legal framework for the fund industry 14 - From the period of 2011-2013, not only did the Vietnam’s economy face difficulties, which limited the development of fund management companies, but the mechanisms and policies of Vietnam were also not enough to stimulate foreign investors The participation of many foreign investment funds contributes to diversifying the investor structure on the stock market and developing the system of organized investors Therefore, it is necessary to renew the old policies to attract more investors - Vietnam has tried to attract the participation of foreign investors, especially foreign investment funds through: Policies on foreign ownership ratios in Decree 60/2015/ND-CP; Administrative procedure reforms for foreign investors when participating in the Vietnam stock market from 2015 until now; Investment promotion conferences successfully implemented by the Ministry of Finance and State Securities Commission in 2018 and 2019 - These additional amendments aim to improve the legal framework for the fund industry, in line with international practices and on that basis to attract the attention of domestic investors, as well as foreign investment capital to further develop securities investment fund types, form a professional system of organized investors, and create stability for the Vietnam stock market Results - Foreign investor portfolio value at the beginning of 2020 (after implementing new policies in 2019) reached nearly $37 billion dollars, more than double the $14.7 billion in 2015 Of which, according to the trading code, there were 2,600 foreign investment funds participating in the Vietnam stock market  Developing and promoting modern investment fund products (ETFs) - To address the problem of limited “land" to make profit , fund management companies should focus on developing open-end funds and ETFs 15 - According to international practices and highly assessed in the context of international integration, especially open-end funds and ETFs are effective fund types because they have flexible, transparent, and safer fundraising methods for investors - In 2014, the stock market marked the launch of the first ETF fund, VFMVN30 ETF By 2020, the fund industry had five ETF funds; among them, three new ETF funds were established: VFM DIAMOND ETF, SSI FINLEAD ETF, and VinaCapital VN100 ETF Results - In the first six months of 2020, the NAV of VFM DIAMOND ETF significantly increased from VND 102 billion to VND 1,300 billion, and SSI FINLEAD ETF rose from VND 262 billion to VND 600 billion In June 2020, the total net asset value of ETF funds was VND 7,250 billion  Expanding the Market - The stock market has faced difficulties for many years, so expanding the market to other industries besides securities may bring more financial opportunities and benefits Fund management companies should carefully evaluate the markets and industries they want to expand into and choose feasible and high-profit investment opportunities In addition, developing new services and diverse products can also help fund management companies expand the market and increase revenue growth - Since 2018, MB Securities has expanded the market and invested in other financial products that are not securities, including investing in government debt instruments, buying bad debts from banks, and investing in infrastructure development funds 16 - SSI Fund Management Company has expanded the market by deploying investment and advisory services in asset management and private funds, helping to expand the company's investment network in the Vietnamese market Results - MB Securities: In 2020, MB Securities reached a post-tax profit of over VND 239 billion (about USD 10.3 million), an increase of 225% compared to 2019 As of June 2021, the total assets under management of MB Securities reached VND 11,000 billion - SSI: As of the end of 2020, SSI was the second-largest fund management company in Vietnam with total assets under management of over VND 36,000 billion, an increase of 21% compared to 2019 In Q1/2021, SSI achieved pretax profit of over VND 400 billion (about USD 17.5 million), an increase of 61% compared to the same period last year  Evaluating Solutions - Completing the legal framework is the basis to ensure sustainable development for the fund industry in Vietnam This solution is simple but most effective for fund management companies in Vietnam - The reason is that the legal framework provides fund management companies with a system of regulations and guidelines to operate efficiently, ensure transparency and competitiveness, and minimize risks for investors If the legal framework is not completed, fund management companies will face difficulties in developing and expanding their operations, and negatively impact the reputation of the fund industry in Vietnam - This solution helps to establish an organized and professional investor system, creating stability for the Vietnamese stock market Not only does it help Vietnam's mechanisms and policies attract foreign investors, but it also 17 promotes support mechanisms for fund management companies to introduce new products, particularly ETFs, to develop the fund market in Vietnam Therefore, completing the legal framework is also the basis for further developing other solutions B Investment Funds in Vietnam I Current situation in Vietnam Classifications of investment funds  According to the participant: - Public funds: A public fund is established when it meets the following conditions: + It has at least 100 investors, excluding professional securities investors who purchase fund certificates, except for portfolio conversion funds + The total value of fund certificates sold reaches at least 50 billion VND - Member funds: Member funds are established by members based on capital contribution contracts The establishment of member funds must meet the following conditions: + Minimum contributed capital of 50 billion VND + Comprising from to 99 member contributors, including only professional securities investors + Managed by 01 FMC + The assets of the member fund are held in custody by an independent custodian bank separate from the securities investment fund management company  According to operational objectives: - Venture capital funds - Growth investment funds 18 - Safe investment funds The Securities Law 2019 did not provide regulations on the conditions for establishing these types of funds in Vietnam, and most of these funds were foreign funds  According to the instrument - Equity Investment Funds - Mixed investment funds - Money Market Investment Funds - Bond Investment Funds The Securities Law 2019 did not provide regulations on the conditions for establishing these types of funds in Vietnam, and most of these funds were foreign funds  By legal nature - Corporate funds - Trust funds The Securities Law 2019 did not provide regulations on the conditions for establishing these types of funds in Vietnam, and most of these funds were foreign funds  According to mobilized manner - Closed-end funds: - Open-end investment fund: divided into two types (load funds and no-load funds) - Exchange trade fund (ETF): + Having at least 02 members + Ensuring the charter capital of the fund is not less than 50 billion VND + The ETF replicating the benchmark indices of the Vietnam Stock Exchange is constructed and managed, including Hanoi Stock Exchange (HNX) (HN INDEX, HN 30) and Ho Chi Minh Stock Exchange (HOSE) (VN INDEX, VN 30) 19