final report financial institution and markets topic mutual funds in vietnam

Returns Investors Professional In other words, the essence of a mutual fund is that it is managed by a fund management company.. Summary of Vietnamese mutual fund industry development

VIETNAM NATIONAL UNIVERSITY - HO CHI MINH CITY

INTERNATIONAL UNIVERSITY SCHOOL OF BUSINESS

FINAL REPORT FINANCIAL INSTITUTION AND MARKETS

SEMESTER 2 (2021- 20222)

Topic: Mutual funds in Vietnam Lecturer: Associate Prof Vo Thi Quy

Group 8 Group members:

Phạm Võ Như Ngọc BAFNIU20141

Table of Contents

I MUTUAL FUNDS

Overview

Pricing Shares of the Mutual Fund

Summary of Vietnamese mutual fund industry development

Three types of mutual funds in Vietnam

Il THE COMPARISON BETWEEN MUTUAL FUNDS AND ETF

I FUND CERTIFICATES COMPARED WITH STOCKS

IV INVESTMENT TREND OF MUTUAL FUNDS IN VIETNAM

V REFERENCE

I Mutual Funds:

1 Overview:

Mutual funds serve as a key financial intermediary, which is a form of investment that operates under a professional management company Accordingly, the fund will sell shares to individual investors and invest the money they receive in a portfolio of securities (usually stocks or bonds) for the investors

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In other words, the essence of a mutual fund is that it is managed by a fund management company In Vietnam, there are some famous fund management companies such as commercial banks, Dragon Capital Vietfund Management Joint Stock Company, Viet Capital Asset Management, VinaCapital Vietnam Opportunity Fund Limited

2 Pricing Shares of the Mutual Fund:

The price per share of a mutual fund is equal to the net asset value (NAV) per share, which represents the value of the portfolio (per share) after accounting for expenses incurred from managing the fund

Net Asset _ Fund Assets - Fund Liabilities

Value ~ Totalnumber of Outstanding Shares

VFMVFI - a fund operating under the mutual fund model of Vietnam will be used to

illustrate: As of 31/12/2021, the NAV was around VND78,546 which was equal the NAV of

the fund (VND 1,641,867,480,749) divided by the number of fund certificates outstanding

(VND20,903,082.11), which means that a share of VFMVF1 was priced at 78,546

31/12/2021

2 Number of fund certificates outstanding

3 NAV per fund certificate (VND) 78,546.66

3 Summary of Vietnamese mutual fund industry development:

In Vietnam, in 2003, the first fund management company was born (Vietnam Investment Fund Management Company - VFM) with the main activities of fund management, portfolio management for investors At the beginning, fund management activities were carried out quite simply, with models of closed-end funds and member funds

In the period 2011-2021, the legal framework for the operation of fund management companies and investment funds continues to be supplemented with new fund models (open-ended funds, ETFs, real estate funds) that have been evaluated and marks the strong development of Vietnam's fund management profession

As of now, there are 3 main types of mutual funds: open-end fund, closed-end fund and member fund

4 Three types of mutual funds in Vietnam

a Open-end funds:

Open-ended fund is the fund in which capital is contributed by investors with the same investment objective and is managed by a reputable fund management company Experienced specialists of the fund management company will invest money in securities (stocks or bonds) that are screened and selected based on predetermined criteria with an ultimate aim is

to gain profit for investors in medium to long terms

With open-end fund, investors are allowed to withdraw or add capital to the fund after the start of the fund

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Depending on the investment rations, open-ended funds are divided into 3 main types: stock funds, bond funds and balanced funds In a general way, stock fund is a portfolio consisting

of many different types of stocks with high risk and high return; bond fund is a portfolio of many different types of bonds, with low risk and low return; and balanced fund 1s a portfolio consisting of a mixture of bonds and stocks with a definite proportion, msk and return balanced

In Vietnam today, the number of open-ended funds dominates with 36 active funds (statistics from State Securities Committee):

Fund name Authorized capital

BaoViet Equity Dynamic 71.247.586.800 22 VinaWeaith Enhanced Fixed

'Vietnam Digitalization Fund

3 DC Nea (HH 1.000.000 000.000 5a ven 25 DFVN Fixed Income Fund 60.173.500,000

ict Prospect Equity

4 Open - Ended Fund (BVEF) | 85288000.000

4 Ve CASEY | (6494080860

45 Vietnam Select Equities 70.798.450.000

Investment Fund (VFMVSF) ù 2 7 7 Fait Bard F 80000000000

16 DOC Ble Chip Fund 806.460.000.000 +6 enone is KAIRIE

Manulife Balance Fund ụ EU

{MEVF) 29 Chubb Bond Plus Fund 60.934.000.000

VinaCapital Insights SSI Sustainable Competitive

7 Balanced Fund (VIBF) 80.561.357 000 18 Anvantage Open-Ended pe 111.922.428.800 30 $S!BOND FUND 68.069.000.000

Fund (SSI-SCA)

(VCBF-BCF) §9.164.003.100 Eastspring Invesiments 31 Techcom Bond Fund 60.963.790.000

19 Vietnam Navigator Fund §3 203 406 730

20 An Binh Bond Fund (ABBF) §3.470 100.000

Manulife Equity Fund Amber Safe Bond Fund

35 DFVN Capital Appreciation 75.121.600.000

Fund

36 PVcom Bond Fund 50.100.000.000

b

Closed-end funds:

Closed-end fund is a concept used to indicate that the fund index is issued only once on primary market, through the process of raising capital for the fund, and the fund does not have obligation to repurchase shares/investment certificates when investors have a resale

demand In other words, if investors want to resell the fund certificate, they have to find a

broker with some fees to help them

Due to disadvantages in comparison with open-end funds, as of now, according to the statistic

of State Securities Committee, there are just remain 3 active closed-end fund in Vietnam:

1 eereeom (rCRein 50.000.000.000 Active

5 ThienViet Growin | 170000/000/000| — stive

ThienViet Growth

3 Fund 3 499.008.000.000] Active

In the table are the differences between Open - End fund and Closed - End fund:

Criteria Open - End fund Closed - End fund

Size of capital and

operating time Size and operating time are both unlimited defined period of time The size Release a fixed amount for a

of the closed-end fund changes only when the decision to increase capital is taken

Sales abilities and

fund certificate’s

Trading of fund certificates is done directly from the fund

The trading of fund certificates

is done from the broker with the

to NAV

distribution along with transaction fees transaction brokerage fee

Fund certificates are The distribution of fund distributed continuously at certificates is only done during Distribution Agents such as the initial mobilization, or when Securities Company, Bank, increasing the fund's charter Fund Management Company, capital, through a securities

etc company or a fund management

company

Liquidity High Low

Provisions Require a reserve in the budget Not required

for redemption of fund certificates

Price volatility Low price volatility compared | High price volatility compared

to NAV

Investment objects

Suitable for investors with

small capital (from 1 million), the fund accepts monthly/quarterly payment for periodic investment Suitable for investors with large

amounts of money with high risks high returns

The big difference that affects small and inexperienced investors’ choice between 2 funds is liquidity

Because in closed-end funds, the fund management company does not have obligations to repurchase the fund certificates, the investors will take a longer time in comparison with open-end funds to transfer fund certificates into cash As a result, participants of closed-end funds have to face higher liquidity risks

With small and inexperienced investors, they will feel safer with securities that can transfer

into cash as fast as possible For that reason, today, the number of investors choosing to invest in open-end funds is larger than in closed-end funds

1 Member funds:

A member fund is formed when capital contributors enter into a capital contribution contract The following requirements must be met before establishing a member fund: Firstly, the

minimum capital contribution is VND 50 billion; Secondly, there are between 02 and 99

capital-contributing members, all of whom are professional securities investors, which is different from an open-end fund because an open-end fund has an unlimited and inexperienced number of members; Thirdly, it is managed by a single securities investment fund management firm; Finally, the assets of member funds are deposited with a depository bank that is not affiliated with the securities investment fund management organization The member fund's portfolio and investing operations must adhere to the investment objectives and policies outlined in the Fund's Charter and declared in the Prospectus Secondly, the fund may invest in the following asset classes: deposits, money market

instruments, government bonds, listed shares, traded shares and bonds, stocks, and unlisted

bonds, Thirdly, the fund management business is only permitted to deposit funds and invest

in the money market instruments from credit institutions recognized by the Board of Fund Representatives Fourthly, in line with enterprise legislation, member funds may contribute money to create joint-stock firms and limited liability businesses If the fund's charter allows

it and is approved in writing by the General Meeting of Investors, the member fund may invest in real estate that fulfills the prerequisites for doing business under real estate legislation

Currently, there are about 11 member funds active in the Vietnam market:

capital (VNB)

Investment Fund (VVIF2020)

Fund (VDF)

3 PVI Opportunity 1.000.000.000.000 Active

Investment Fund (POF)

Fund (FIF)

5 Bao Viet Value 1.000.000.000.000 Active

Investment Fund (BVIF)

Investment Fund (PIF)

7 MKDS Finance Fund 50.000.000.000 Active

8 Japan Asia MB Capital 200.000.000.000 Active

Fund (JAMBF)

(AFMF)

10 Hang Thong 50.000.000.000 Active

Development Fund (TCBF)

11 SSI Investment Member | 343.000.000.000 Active

Fund (SSIIMF)

ce Conclusions:

After analyzing the three types of funds, we can conclude that open-end funds are the most suitable investment channel for small fund suppliers to invest in because of many reasons Firstly, it requires a small amount (1 or 2 million VND) to buy With this budget, the fund management company can support investment in both bonds and stocks, sometimes, in real

estate

Secondly is about “ime flexibility The initial quantity will be flexible and modified according

to demands depending on the times If you do not have the expertise or time to examine the market, you should invest in open-end funds

Thirdly, open - end funds have the transparency of the fund management company All information regarding the investing process is publicly available on the management unit's website For example, when you join the DFVN Growth Investing fund, you will receive detailed information regarding the investment procedure The fund's performance results will

be posted on the company's website on a regular basis You may use this to learn more about the return on your money

Finally, it has /iguidity assurance When investors desire to resell fund certificates, open-ended funds always contain a provision to pay As a result, whether investors are new to investing or have been doing it for a while, they have the right to withdraw money at any moment At their request, the fund will purchase back a portion or all of the fund certificates This is a legal requirement, and the fund has no choice but to comply

Appendix 1: Top 3 best funds based on their profits

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pcos ocver Quỹ cân bâng 6577418 -1997% 0.41%

Appendix 2: Different funds, different characteristics:

77.82%

86.25%

As usual, fund fees, called the expense ratio, can range from close to 0% to more than 2% depending on the fund's operating costs and investment style Each type of investment fund

will have different transaction fees, transaction days, as well as different investment

portfolios For example, with DC dynamic securities fund, they will invest most of money in

securities in both Hose and HNX, and debt securities as well as cash

ASSET ALLOCATION BY ASSET CLASS

As of [30/04/2022 v]

WB Hose

BB Fixed Income

Cash

MB NX

@ urcom

Meanwhile, DC Bond Fund (DCBF) has distributed its assets differently:

ASSET ALLOCATION BY ASSET CLASS

As of 30/04/2022 v

Hl Bonds

Hl Certificate of Deposit Cash & cash equivalents

76.4%

10.6%

8.0%

5.0%

0.0%

76 69

15.3%

d Calculate profit when investing in the fund

Regardless of investment in any field, profit is always a prerequisite that many investors are interested in Profit from investment in fund certificates will be calculated according to the following formula:

sua Current fund certifieate price

" a=

profit Pund certificate

purchase price 1

Where:

Current fund certificate price: is the price of 1 currently announced fund certificate unit (unit: NAV/Fund certificate)

Buying price of fund certificates: is the price of 1 unit of fund certificates that you have bought and matched (unit: NAV/Fund certificate)

NAV/Fund certificate: fund certificate price

For example:

You invest in DCBF Open Investment Fund, the purchase price is 20,000 VND, the current

price announced by the Fund increases to 27,000 VND Thus, the temporary profit you

receive is about 35% Moreover, according to the above formula, it can be seen that the actual

profit from the investment of fund certificates will come from the difference in the price of fund certificates at the present time compared to the price of fund certificates at the time of your purchase minus buying and selling fees if any) Thus, if the price of fund certificates at the present time minus the price of fund certificates at the time you buy (after deducting fees)

is higher than the price you buy, you are making a profit

In addition, with some open-ended investment funds, investors' profits also come from:

dividends of holding stocks, bond interest rates, term deposit interest rate

e Disadvantages of open-end funds:

Besides the advantages as mentioned in the conclusion parts, open-end funds also have some disadvantages:

Firstly, pressure from shareholders: Open-ended funds are vulnerable to large inflows and outflows A sudden outflow can force a mutual fund manager to sell holdings at rock-bottom prices, causing a loss to all unit holders in the fund

Secondly, less attractive to experienced and risk investors: Compared with experienced investors, investing in open-end funds will bring them less profit, so usually professional investors will not invest in this fund

Finally, market risk: The NAV of an open-ended fund fluctuates every day owing to stock market volatility Thus, one must cautiously invest in open-ended funds