In the next instalment in our series of exclusive interviews with industry experts, Tuan Le, Lead Portfolio Manager of Vietnam Enterprise Investments Limited, provides his insight on the biggest growth opportunities and most common risks for investors, and discusses his company’s approach to investing.
1.) What tax-efficient schemes does your company work with, and how do you offer a unique/compelling approach for advisers?
Dragon Capital’s flagship fund, Vietnam Enterprise Investments Limited (VEIL), is listed on the LSE and is a FTSE 250 constituent. Therefore, from a point of view of tax-efficient schemes to UK retail investors, it can easily be included in an ISA or SIPP plan.
2.) How active are you in providing education to advisers on the types of clients that are suitable for these types of investments, as well as any changes in regulation or nuances in the existing rules?’
With Vietnam classified as a frontier market and VEIL being a single-country fund, advisers do need to consider how the risk appetite suits their client’s situations. VEIL provides regular updates to help educate advisers and investors, including quarterly webinars, presentations in the UK 1-2 times a year, portfolio manager roadshows, monthly and quarterly portfolio updates to the LSE, and a monthly newsletter on VEIL’s website and sent to its distribution list. The investment manager also informs investors about any significant changes to regulation or Government policy which have an impact on the market and portfolio.
3.) Where and in which types of companies are you seeing the biggest growth opportunities?
Dragon Capital forecasts 15-18% earnings growth in 2024 for the top-80 stocks in its investment universe. This growth is expected to be driven by credit expansion and low interest rates, and Dragon Capital expect the sectors to exhibit the most significant growth in 2024 to be banking (+18% YoY), consumer discretionary (+47% YoY), and materials (+41% YoY), contributing a potential 71% to the market’s earnings. VEIL’s portfolio is expected to deliver EPS growth of over 20% through its exposure to the aforementioned sectors.
4.) What do you see as the biggest risks for investors?
In late 2022/early 2023 the bond market stalled due to a change in Government regulation aimed at implementing checks and balances, impacting the real estate market and overall credit availability, leading to delayed bond repayments and maturity extensions. While the risk of default hasn’t completely disappeared, the banking system’s significant available liquidity, reflected in interbank lending rates being at near zero and historically low deposit rates, positions the sector with the means to restructure problematic bonds.
5.) Should advisers be worried about a lack of diversification, and why?
For any investor comfortable with a single-country investment vehicle, VEIL offers exposure to Vietnam’s public equity markets across a broad range of sectors, and holds nearly 40 stocks, none of which currently make up more than 10% of NAV. The top ten companies are under 60% of NAV making the fund high conviction but not too high in its concentration.
