Analysts see more mutual funds going open-ended

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Vietnam has already seen one mutual fund switch from being closed-end to open-end, and analysts expect this to become a trend soon.

VFA, owned by fund manager VFM, last March became an open-end fund. As of September last year it had gross assets of VND169.2 billion (US$8.1 million).

Pham Khanh Lynh, VFM's deputy director, said plans are under way to convert the three remaining closed-end mutual funds into open-end funds.

VFM issued an open-end fund called VFB in February this year.
A closed-end fund raises a fixed amount of capital through an initial public offering before listing and trading like a stock.

An open-end fund allows investors to pull out at any time by selling the units back to the company. The company can issue more units whenever there is demand.

Many closed-end funds have lost their attractiveness due to their increasing discounts to net asset value, Lynh said.

For instance, the NAV of his company's VF1 fund stood at VND17,062 in mid-April, but on the stock market it was traded at VND14,500, representing a discount to NAV of nearly 15 percent.

The general director of a foreign fund, who requested anonymity, expected an increase in the number of mutual funds, especially domestic ones, converting into open-end funds.

But this is not without its challenges, Lynh said, since a fund then always has to have the liquidity to redeem its units.

Chris Freund, general director of fund manager Mekong Capital, said the funds should invest in listed rather than unlisted stocks.

No open-end mutual fund in the world has succeeded in making profits from unlisted stocks, he said.

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