VFM plans to establish bond fund in July

Talking about the impact of inflation pressure and macroeconomic instabilities on the operation of fund management companies, Tran Thanh Tan, Chair of VFM, President of the Fund Management Club said that many people have already forecast the price increase of essential goods and that is inevitable if looking at the current reality.

Therefore, Tan also said that this is the stage where members of the stock market in general and fund management companies in particular should be calm and consider carefully the development strategy for the post-price increase to find the opportunity, adding that he believed this situation would be resolved soon, might be after the second quarter.

According to Tan, if the management agencies complete the legal framework and market institution this year, especially soon finalise the legal documents guiding the amended Law on Securities, etc. about 50 to 70 percent of the current difficulties of the stock market could be resolved, particularly for fund management sector, for example permitting to establish open-end funds or transfer from closed-end fund to open-end fund model.

Currently, the difference between market price and net asset value (NAV) of funds is relatively large, if those funds could convert into open-end fund and investors are allowed to withdraw capital based on NAV; that would immediately have a positive impact on trading price of fund certificates.

Tan said the presence of open-end fund would not only solve the limitation that current closed-end funds are facing, it would also set the stage for the introduction of new products, which could help the fund management sector in particular and stock market in general develop.

For example, when a open-end fund is established, people could base on that mobilise capital to open bond funds, public funds in the form of social security funds, insurance funds, pension funds, etc. with enormous resources to be put into the market.
On that basis, fund management companies would grow very rapidly and the market would have access to extremely large amount of domestic capital.

Tan added that people often raise the issue that foreign indirect investment does not flow into the country, but in his viewpoint, that is just a small amount of capital of Vietnam’s stock market. Internal forces must be considered, in which funds are the channels of those internal resources.

Highly appreciate the potential for open-end fund development in the future, Tan shared that if regulations on open fund were completed on schedule in July, VFM would immediately establish bond fund, with a modest initial capital investment of about 500 billion dong. VFM has currently obtained sufficient documents and facilities to soon establish bond fund. – CafeF

Tags: Fund Management Club