Vietnamese private pension player maps growth strategy
Dragon Capital Pensions is making good headway in Vietnam's fledgling private pensions industry, as it engages in more discussions with companies to provide voluntary pension plans for locally-based employees, a senior executive told AsianInvestor.
There were 1,992 fund participants in Dragon Capital Pensions by March 2024 – and that number is expected to climb, according to Will Ross, chief marketing and distribution officer.
“Our efforts in the last three years have made certain impacts in the HR/finance community in Vietnam as more and more corporates now have an understanding of the pension concepts; several are in active discussions with Dragon Capital on structuring and implementing a pension scheme for their employees,” Ross told AsianInvestor.
Dragon Capital
Dragon Capital is Vietnam’s first private and voluntary pension plan player launched in 2021.
The Ho Chi Minh-headquartered company has about $5 billion in assets under management, making it one of the largest asset managers in Vietnam’s capital market.
Established in 1994, Dragon Capital offers asset management (with the license to offer a provident fund plan) and discretionary portfolio services.
STILL NEW
Private pension is still a relatively new concept in Vietnam and the majority of companies in the country still find the concept foreign, said Ross.
The programme offers companies a tool to provide employees with retirement benefits that provide a supplemental stream of income for retirement.
Ross said the pension plan team is currently focusing on educating companies on the importance of offering pension plans via participation in industry conferences, organising events and workshops, publishing research papers and other related activities.
While the pensions business was born in 2021, a "more aggressive launch in the last quarter of 2023" was in the works, Dominic Scriven, chairman of Dragon Capital, told AsianInvestor previously.
One of the pension player's big developments of 2023 was that it inked an agreement with HSBC Vietnam to offer its pension plans to all its employees in June 2023.
“...Dragon Capital believes the emergence of pension funds will not only help with employees’ financial planning but also play a crucial role in consolidating the equity market as the stock market in Vietnam is currently dominated by retail investors, who account for more than 90% of daily traded value.”
Dragon’s pension programme allows investment into three pension funds based in risk appetite – balanced, moderately conservative and conservative.
The balanced fund has yielded 13.25% in 2023; the moderately conservative fund brought in 6.9%; and the conservative strategy pocketed 5.5% gains, said Ross.
Pension plans in Vietnam can only allocate to fixed income and equities, and in particular are required to allocate at least 50% to government bonds.
“For equity exposure, direct stock holding is not allowed and pension funds have to use open-ended funds or ETFs to gain exposure,” Ross said.
Voluntary retirement funds have gained widespread popularity in many countries worldwide.
The number of people in Vietnam at and above 60 years old is expected to increase by 5 million and elderly people will account for more than 17% of Vietnam’s population by 2030, and will climb to 27.2% of t the population by 2050.
LOOK AHEAD
Ross said the next 12 months will be interesting for Vietnam’s financial markets as the government has been increasingly paying more attention to the upgrade of Vietnam to emerging market status.
“Deputy Prime Minister Le Minh Khai on 29 Dec 2023 signed Decision No 1726/QD-TTg approving the Stock Market Development Strategy until 2030, which includes [promoting] the upgrade of Vietnam’s market status from frontier market to emerging market by 2025.
"It is likely that an upgrade with FTSE Russell [for index inclusion] would be more feasible to happen by 2025, following which an MSCI upgrade might materialise,” added Ross.
Technology will play a crucial role in expanding pension coverage across the Asian nation.
“We foresee an enormous requirement for infrastructure and facilities for a seamless operation of pension programmes for the population in Vietnam,” said Ross.
Dragon Capital has invested heavily in the development of technological infrastructure -- from the core system to front-end software to facilitate both investors’ monitoring their pension accounts and companies managing their corporate pension schemes, he added.