PXP launches Vietnam's first open-ended fund

PXP Vietnam Asset Management, which manages $120 million in listed and pre-listed Vietnamese equity, has a big few weeks ahead of it. The Ho Chi Minh City-based firm is about to launch its first open-ended fund, and to list its flagship PXP Vietnam Fund on the main board of the London Stock Exchange (LSE).

The firm has converted the $12 million closed-end Vietnam Emerging Equity Fund into an open-ended vehicle and hopes to soon merge it with another of its funds, the Vietnam Lotus Fund, says PXP chief executive Kevin Snowball. That would leave it with one $37 million open-ended fund and one closed -- the $62 million PXP Vietnam Fund -- both of which would follow broadly similar listed equity-dominated strategies.

"It made sense at the time to launch three closed-end funds with increasingly flexible mandates as the Vietnamese market was developing from 2003 to 2007, since we wanted to have relatively more exposure to the privatisation process, which led to the rapid expansion of the stock market," he says.

When the firm launched the PXP Vietnam Fund at the end of 2003, Vietnam's total market capitalisation was around $160 million, with less than 20 listed companies and average daily turnover of less than $100,000, says Snowball. Now the market is well over $30 billion, with nearly 500 listed companies and average daily turnover in excess of $100 million.

"Turnover is sufficiently liquid to justify an open-ended fund," he adds, "And the size of the market means we can gain sufficient exposure to any new privatisations without worrying that individual weightings would breach limits."

The company is also readying the PXP Vietnam Fund for listing at the end of March in London, subject to approvals, licences and so on, says Snowball, adding that the listing particulars are being prepared.

"Dublin has traditionally been a great market for funds to list in, but has no trading platform, so liquidity depends on market-makers in London," says Snowball. But PXP's two previous main market-makers, CLSA and JP Morgan, don't make markets in offshore funds any more, he adds.

While there are others now that do, the financial crisis understandably made investment banks reluctant to risk capital in illiquid products, says Snowball. "We want to do our best to ensure shareholders avoid a future recurrence of that liquidity void, which a transparent, quote-driven market will hopefully continuously provide."

It therefore makes sense to go to a market with a trading platform, he says. "As and when conditions improve -- when discounts narrow or preferably disappear -- we can hopefully issue more shares," he adds.

Most of the other listed Vietnam funds are to be found in Dublin (those managed by Dragon Capital, DWS, Prudential Asset Management and PXP), London's Alternative Investments Market (VinaCapital, Vietnam Holdings) or the LSE (Indochina Capital -- but the firm is in the process of winding up, which will leave PXP Vietnam Fund as the only main market listing). In addition, Dragon Capital has an AIM-listed property fund, and Saigon Asset Management has listed a couple of funds in Germany.

PXP had, in early 2008, been keen to list a value-orientated product in Singapore to widen the investor base to Asian retail and institutions -- particularly in Taiwan and Singapore, which are currently major sources of portfolio and direct investment into Vietnam. An SGX listing would allow for trading in the Asian time zone as well.

These plans were shelved, however, due largely to relative complexity, as Singapore has an underdeveloped fund market, says Snowball, but PXP may look at making a new fund offering in Asia if it can find a suitable underwriter.