Meritz Asset chief bets big on Vietnam
This year, 22 new funds were established, which have attracted 130 billion won ($117.48 million) since February when the government’s tax exemption on overseas funds was implemented.
The profit of Vietnam funds has increased about 20 percent compared to the beginning of the year.
John Lee, chief executive officer for Meritz Asset Management, fueled the recent rising popularity of Vietnam funds.
Lee has been traveling across the country to attract investors to the company’s equity balanced fund, Meritz Vietnam Securities Investment Trust, that started accepting investors on Monday and will be open until Friday.
The fund is a closed-end fund that makes it difficult to cash out within the next 10 years. It will be managed by a star manager who attracted 1.7 trillion won in investments last year.
However, this is not without concerns, because 10 years ago many Korean investors, who rode the rising popularity of Vietnam funds, suffered huge losses when the Vietnamese market tumbled.
Lee, of Meritz, said although he isn’t sure about the future, he was confident that there are many good companies in Vietnam, which will result in solid investments.
The JoongAng Ilbo recently interviewed Lee. The following is an edited excerpt.
Q. Why Vietnam? Do you have a special relationship with the Southeast Asian country?
A. Thirty years ago when I worked at Scud Asset Management, Vietnamese government officials visited me and asked if I could create a Vietnam fund much like that of the Korea Fund. Back then, the conditions were not adequate. But I have always been watching [the Vietnamese market] since. I wanted to re-create the success of the Korea Fund.
Vietnam is so much like Korea 30 years ago, not only in growth but also the high education rate as well as saving rates. Even the urbanization rate is up to 30 percent. Foreign companies are beginning to rush in with investments. In fact, Apple has announced it’s investing 1 trillion won [in Vietnam].
In 2006, large investments flowed in to Vietnam but the end result wasn’t favorable.
Ten years ago, compared to the size of the market, too much money rushed in. There were even rumors that half of the foreign investments made in Vietnam were by Koreans. And there was also the Lehman Brothers crisis. Today, the market capitalization of the Vietnamese market is 70 trillion won, 10 times the 7 trillion won in 2006. Inflation is stable and Vietnam enjoys an economic growth rate of 7 percent per year. Not many markets in the world hold such high growth rates.
That’s why I said I will invest substantial amounts of my own money [in Vietnam]. But why now? I don’t know. It’s impossible to predict the timing in the stock market and the stocks the go up and go down. But one thing for certain is that there are many good companies in Vietnam.
It’s rare for a CEO of an asset management company to personally go across the country to promote the investment fund.
It’s because the distributors [securities companies, banks and so forth] aren’t enthusiastic. The commission structure [of the fund] isn’t profitable [to them]. For investors, our fund is a good investment but for distributors there aren’t many reasons to sell them aggressively. For that reason, I’ve personally promoted the investment fund.
How’s the response from investors?
Many agree they should invest in Vietnam as a long-term investment or preparing for life after retirement. Some expressed their dissatisfaction with the recent performance of Meritz Korea Securities Fund.
There are those whose have lost their investments [with Meritz]
I told my investors that they don’t have to worry about the Meritz Korea Securities Fund. This is not a short-term investment fund. I feel offended when some compare it with [Hanwha Asset Management’s] Buy Korea Fund with just a one-year profit rate. The management philosophies of the two funds are different. Ours is a long-term investment that invests in a company’s fundamental.
Investors have to wait but the media keeps encouraging short-term investments.
Isn’t that because investors in the past have experienced failure after investing in hugely popular funds?
If investors are looking for long-term investment with the reserve capital that they have in preparation of life after retirement, they should be buying up more when the stock market falls. In fact during the financial crisis [of the late 1990s] 40 percent of the investments in Korea funds evaporated. But instead of blaming me [for the loss] a foreign investor wanted to buy more stocks.
There are those who raised concerns that you are focusing too much on the Vietnam fund than on the Korea securities fund.
I am not a fund manager and the funds are managed by a manager. If I intervene that would impose problems. Just because a fund doesn’t invest in Samsung Electronics, I shouldn’t be telling [the manager] whether to buy or sell [the stocks.]
It seems many of the investors are investing in the Vietnam fund because you’re in it. But then there are concerns that you’re not the one who’s managing it.
I’ve said it constantly that the management team who has shared the same philosophy with me for the last 20 years are managing the fund. Although there are those who misunderstand this I believe even these investors are those who share our management philosophy.
At the promotional tour the managers have introduced the product to investors.
So will you be taking responsibility [for any losses]?
I can’t say I will be taking responsibility. It would be more appropriate to say I will do my best in trying to protect the interest of our clients. My job is managing the managers.
This is a closed-end fund and there are those who are worried about having their investments tied up for the next 10 years.
This fund not only invests in equities but also on IPOs and treasuries. If the money keeps going out and coming in, we won’t be able to make a proper investment. The Korea fund is also a closed-end. If Korea [securities] fund was open-ended we wouldn’t be able to operate with stability.
You don’t even have an office in Vietnam.
When I was managing the Korea Fund I worked alone in New York. At the time when I invested the fund in SK Telecom, I asked a fellow telecom analyst if I should buy it, who told me I should never sell it. While others sold after the stock value [of SK Telecom] exceeded 100,000 won, I sold it at 4.4 million won after buying it at 50,000 won. We don’t need to spend money running a local office as we can utilize the research reports of securities companies that already have offices in Vietnam. Just because we’re investing in Vietnam there’s no need to be in Vietnam. It is more helpful to exchange investment opinions with other analysts.
BY KOH RAN [firstname.lastname@example.org]