Key Takeaways
- • VinaCapital Vietnam Opportunity Fund (VOF) bought shares in Vingroup (VIC) after the stock rose 350% in the year to 30 June, following rival Vietnam Enterprise (VEIL) into the position.
- • VOF's 10.5% total dollar investment return for the year trailed the 36.5% return of the VN Index, with the absence of Vingroup cited as the main reason for underperformance.
- • Vingroup grew to 5.6% of VOF's net assets by the end of September, making it the fund's fourth-largest holding, after an initial 5.4% allocation in August.
- • Chair Kathryn Matthews said VOF will make no new private equity investments until performance improves, citing 'extremely challenging' conditions and two 'distressed' unlisted holdings the manager is looking to exit.
- • Vingroup accounted for 19.3% of the VN Index at 30 June and about two-thirds of the benchmark's 12-month advance, per QuotedData.
Summary
VinaCapital Vietnam Opportunity Fund (VOF) has followed rival Vietnam Enterprise (VEIL) in buying Vingroup (VIC), Vietnam's largest conglomerate, according to QuotedData. The fund's manager, Khanh Vu, had previously balked at Vingroup's valuation and its leveraged exposure to its fledgling electric vehicle business, and was caught out when the shares rose 350% in the year to 30 June. Annual results showed that not holding the $62bn group was the main driver of VOF's underperformance: the "£496m" investment company returned 10.5% in total dollar investment return against 36.5% for the VN Index. Net asset value growth nevertheless beat the fund's 10% annual target and improved on a 2.2% decline in the prior financial year.
At 30 June, Vingroup represented 19.3% of the VN Index and contributed roughly two-thirds (24.2%) of the benchmark's advance. VOF partially benefited through its long-term stake in Vinhomes, a Vingroup subsidiary and the fund's top holding at 10% of assets. Over five years, however, VOF's investments fell 5%, which the report describes as a weak record.
Vu capitulated after the financial year-end, allocating 5.4% in August to make Vingroup the fund's fifth-largest holding; by the end of September it had risen to fourth place at 5.6% of net assets. VEIL moved more decisively, raising its position from 0.1% to 9.1% as its largest holding and holding 11.2% of NAV at 30 September, though its five-year performance is also down 2%. Vu justified the new stance by pointing to Vingroup's spin-off of its electric vehicle subsidiary into a separate manufacturing and operating company, and to government grants of major metro, rail, highway and Transport-Oriented Development projects.
The 12 months to 30 June saw VOF overhaul its portfolio, selling $472m of stocks and buying $371m, lifting turnover to 39%. The team was strengthened by the hire of Tuan Ago from Viet Capital Securities as head of investments and Michael Schmidt from Mekong Capital as private equity lead. The fund holds seven unlisted investments alongside 23 listed holdings. QuotedData senior analyst Richard Williams said the return to positive NAV growth was encouraging but that underperformance against the market remained disappointing, while the restructuring and revised fee arrangements signalled that the board and manager recognise the need for change.
At 30 June, Vingroup represented 19.3% of the VN Index and contributed roughly two-thirds (24.2%) of the benchmark's advance. VOF partially benefited through its long-term stake in Vinhomes, a Vingroup subsidiary and the fund's top holding at 10% of assets. Over five years, however, VOF's investments fell 5%, which the report describes as a weak record.
Vu capitulated after the financial year-end, allocating 5.4% in August to make Vingroup the fund's fifth-largest holding; by the end of September it had risen to fourth place at 5.6% of net assets. VEIL moved more decisively, raising its position from 0.1% to 9.1% as its largest holding and holding 11.2% of NAV at 30 September, though its five-year performance is also down 2%. Vu justified the new stance by pointing to Vingroup's spin-off of its electric vehicle subsidiary into a separate manufacturing and operating company, and to government grants of major metro, rail, highway and Transport-Oriented Development projects.
The 12 months to 30 June saw VOF overhaul its portfolio, selling $472m of stocks and buying $371m, lifting turnover to 39%. The team was strengthened by the hire of Tuan Ago from Viet Capital Securities as head of investments and Michael Schmidt from Mekong Capital as private equity lead. The fund holds seven unlisted investments alongside 23 listed holdings. QuotedData senior analyst Richard Williams said the return to positive NAV growth was encouraging but that underperformance against the market remained disappointing, while the restructuring and revised fee arrangements signalled that the board and manager recognise the need for change.
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