Vietnam-focused investment trusts need to fix issues such as high fees and low liquidity if they are to capitalise on renewed interest in the region, according to Numis Securities.
Investment trust analysts at Numis said investors may turn their attention to Vietnam due to its “improving outlook” and “attractive valuations”.
But the analysts said the sector may miss out on any rise in demand because of high performance fees and charges, regulatory fears and a lack of liquidity.
Interest in Vietnamese assets has waned since the financial crisis as many investors were burned after piling into Vietnam funds in 2006 and 2007.
However, Numis said “increasing confidence” in the economy and a rising stockmarket that is still on a reasonable valuation meant it expected investor interest to return.
Numis said closed-ended funds should be the optimum way to invest in Vietnam, given the illiquid nature of the market, but many of the investment trusts were not set up to exploit this.
The Numis report pointed to the proliferation of high fees, with annual charges on London-listed trusts varying from 1.5 per cent to 2 per cent and performance fees of 15 per cent to 20 per cent.
Vietnam Holding, the only pure equity-focused trust listed in London, had an ongoing charges figure of 4.1 per cent in the past year.
Numis said the trusts’ fees were too high and “2 per cent and 20 cent fees are no longer acceptable to many investors”.
Instead, Numis tipped the VinaCapital Vietnam Opportunity fund as the best option for investors, due to its strong track record and attractive discount.
The multi-asset investment trust has delivered a return of 50.9 per cent in the past five years, outperforming the Vietnam market, but is still on a discount of more than 25 per cent.
