Fund industry needs broader investor base to reach growth goals

Vietnam's fund industry has seen substantial growth, with net asset value (NAV) expanding at an average annual rate of around 16 per cent over the past five to seven years. Currently, the industry manages approximately 6 per cent of GDP in assets under management, falling short of the 5 per cent target set for 2030. The industry remains highly concentrated, with a significant portion of assets managed by a small number of major companies, and primarily invested in defensive assets such as government bonds and certificates of deposit. Equities and open-ended funds account for a substantial portion of fund assets.

To reach the growth goals, the fund industry must innovate and diversify its products, making them more accessible and understandable for a broader investor base. This includes products that cater to regular, small investments, similar to those offered in India. The industry should also attract international capital and broaden its investor base beyond professional institutions to a larger segment of the population.

Achieving the 5 per cent NAV-to-GDP ratio by 2030 would require a significant expansion of the industry, with the number of funds increasing from over 100 to around 500, and the number of investors rising from over 700,000 to approximately 2.5 million. This rapid growth would necessitate substantial changes to the industry's operating model, including the adoption of integrated end-to-end investment processes, AI adoption, and the standardization of processes and databases.

The industry will need to strengthen its core capabilities, including reliable data and risk assessment, integration of a fund management and operating system, and a strong technology infrastructure.