VietNamNet Bridge – The first open end funds have been established in Vietnam, but they have modest capital of VND50 billion.

Analysts say investors nowadays do not have profuse capital as they did 6-7 years ago, which makes it very difficult to raise funds at this moment. However, VND50 billion is still a very modest sum of capital for an investment fund.

The problem does not lie in the sum of money the investors have, but in their readiness to make investments.

An investor said he remains unfamiliar with open end funds, therefore, he only contributed VND2 million to the fund. Meanwhile, the investor introduced himself as an experienced investor in the stock market.

Supposed that every investor only contributes VND2 million, a fund would need 25,000 investors. Meanwhile, a listed company with the capital of hundreds of billions of dong only have several thousands shareholders.

If the investors remain unfamiliar with the open end funds, and if they still cannot see the benefits of the funds, they would not contribute money.

The said investor said he does not care about if he can get back the VND2 million, and he would accept to lose the VND2 million, considering this the “tuition” for a training course about open end fund.

Observers have found that the first open end funds established so far all focus on government bonds, which allows to ensure the liquidity and minimize risks. This would bring stable but modest profits.

The observers have noted that it’s quite difficult to raise a VND50 billion, or $2.5 million, and it’s more difficult to raise a fund with the capital of $25-50 million. Meanwhile, $25 million or $50 million is just worth a medium scale fund. Some ETFs, operating under the mode of open end funds, have the capital of up to hundreds of millions of dollars.

In fact, it would be not a so big problem to call for capital from investors to raise the funds worth several hundreds of billions of dong. It would be more simple for the fund management companies belonging to big finance, insurance or banking groups, to do that.

As such, the “parent groups” just need to transfer a part of their capital to the open funds they have just set up, which is enough to settle the capital problem. VND500 billion or VND1 trillion is not beyond their capacity at all.

However, this is not the thing the finance groups should do because the goal the open end funds targets is to diversity the investment capital sources.

Therefore, the next open end funds would meet big challenges when offering to sell fund certificates to increase capital.

There’s one more thing that make investors reluctant to contribute capital to open end funds that the profit they expect is modest, if the funds only focus on the government bonds.

If funds invest in stocks, the investors can expect much more attractive profit. A trading session with the stock price increase hitting the ceiling level would be enough to bring the 10 percent profit. Meanwhile, the open end fund specializing in investing in government bonds would expect the profit of 10 percent only a year.

Therefore, analysts have every reason to believe that Vietnam would have to wait some more time to see the open end funds with big capital.

DNSG