SAM launches Vietnam fund with RNG Invest

SAM 27th November, 2009

Asian Investor- Saigon Asset Management’s chairman and chief executive emphasises the difficulties of investing in Vietnam and laments the lack of big-name investors.

Saigon Asset Management and RNG Invest, the investment arm of Refrigeration Electrical Engineering (REE) Corporation, will launch a new offshore fund investing in Vietnam. This is the second Vietnam fund launch announced in as many days.

The new fund will be a limited partnership domiciled in the US and investing in real estate projects, private pre-IPO companies and listed Vietnamese firms. Ho Chi Minh City-based Saigon AM — which manages two existing funds with $125 million in assets — will manage the new offshore fund, with RNG Invest as the sub-investment adviser.

The initial target fund size is $100 million, and part of the foreign fund will be invested into a local fund raised by RNG Invest that will seek investment from “the most influential companies in Vietnam”, say the firms in a statement.

“We are finalising terms with various anchor investors for a $25 million commitment and plan to raise an additional $75 million in the months ahead, depending on market conditions,” chairman and chief executive Louis Nguyen tells AsianInvestor.

The two firms plan to invite a special group of investors and advisers into the fund, comprising top industry executives and specialist investors in Vietnam and abroad. Saigon AM and RNG Invest intend to meet investors in North America, Europe and Asia in early 2010.

The fund will be run by Nguyen, recently appointed chief investment officer Hoang Nguyen and a team of 20 professionals, and Saigon AM is in the process of recruiting more investment managers for this effort, says Louis Nguyen.

Access to quality deal flow and consistent returns remain challenging issues in Vietnam, he says. Even selecting listed stocks is no simple matter, even for domestic specialists.

“If you are a foreign investor picking stocks from outside of Vietnam or simply don’t know the rules of the land, it may be difficult to find a winner. You might as well play an index ETF and relax,” he says. “Fund managers on the ground combined with local industry leaders and domain experts will increase the probability of success.”

Due diligence is that much tougher in emerging countries, adds Nguyen. “I may have breakfast with the CEO and dinner with the CFO to verify information that often don’t match,” he says. “Then our team does its own deep dive into the financials and talks to the staff of the target investment as well as the customers, the partners and the analysts before we execute. This is not the US, UK or Singapore, where there is a structured process, to find a good investment.”

With regard to property and pre-IPO investments, Nguyen stresses the importance of having experienced and well-known anchor investors. “[Vietnamese] real estate [valuations] may now seem a bit on the high side, depending who you ask,” he says. But if the investor brings in value, such as international branding, technology or know-how, the valuation may be much more attractive, adds Nguyen.

Moreover, post-IPO performance appears to be favourable in Vietnam if there are established anchor investors, customers or partners, says Nguyen. “Meaning that if company ABC is about to IPO and it secures Goldman Sachs or Blackstone as an investor, and also has some large international conglomerates as customers, that can’t hurt,” he says. “That’s what missing in Vietnam, the big names.”

Still, there are numerous opportunities given that the Vietnam economy has quickly recovered from the global financial crisis, says Nguyen Thi Mai Thanh, chairman and chief executive of REE Corporation in Ho Chi Minh City. “We also realise that having alliances with influential companies will allow a greater number of attractive investment targets,” she adds, “as well as access to domain experts in broad industries.”

Ho Chi Minh City-based RNG Invest was established in January 2008 and advises REE Corporation on a portfolio of around $100 million.