HA NOI (VNS)— Domestic fund management companies have recently become more active in preparing for the establishment of open-end funds.
The Vietnam Active Fund (VFA) has drawn up a plan to convert to an open-end fund next year which was approved at the annual shareholders' meeting earlier this year. It held another meeting yesterday to adopt a conversion scheme.
The fund plans to delist from the HCM City exchange by the end of this year, in line with regulations for open-end funds, and get the ball rolling for the planned launch next April.
Vietnam Fund Management Company (VFM) also plans to convert its Vietnam Blue Chips Fund (VFMVF4).
An open-end fund is a collective investment scheme that can issue and redeem shares on demand. Investors buy and sell fund certificates directly from the fund itself, rather than from existing shareholders. This contrasts with a closed-end fund where all shares are issued in an IPO and then traded on an exchange.
According to the VFM, investment habits were likely to change when open-end funds were introduced, including transaction times and costs. However, net asset value and market price of the fund certificates would always be in equilibrium, which could not happen with close-end funds.
Nguyen Doan Hung, vice chairman of the State Securities Commission, said establishment of open-end funds was an inevitable step in Viet Nam as 95 per cent of funds in the world were open-end.
Manulife Growth Investment Fund (MAFBF1) and EastSpring Investments Fund Management LLC also plan to establish open-end funds next year.
The establishment of open-end funds in Viet Nam was approved under Circular No 183 which took effect from March 1. However, the prolonged market downturn led to investors turning their backs on the new product.
VFM planned to introduce the first open-end fund, the VFM30, earlier this year, but postponed due to lacklustre market development. Investors have also voiced their concerns over the current high tax policy which is discouraging potential investors. According to international practice, to attract investors, the Government should introduce preferential policies, including tax incentives.
However, with more firms looking to set open-end funds, it is a positive sign given the current state of the gloomy market. "Spending VND50 billion (US$2.4 million), the minimum for an open-end fund, to test the new model is not too much for most large domestic investors," Nguyen Van Duong, general director of An Phuc Securities Investment Fund Management Company was quoted as saying in Dau tu Chung khoan (Securities Investment). — VNS