How I ended up running a Vietnam-focused investment fund
As we begin a new year, it’s a good time to pause and reflect on how Vietnam has evolved socially and economically since I first visited in 2010. After a challenging year in equity markets around the world, it’s also an ideal moment to underline Kenno’s commitment to this sometimes challenging but always rewarding frontier market.
I was a 22-year-old business student when I visited Asia for the first time. There’s nothing unusual about that, given many people my age were doing the same, with most heading to Thailand. I wanted something different, and Vietnam seemed like a good choice, and it felt like an adventure. Also, I didn’t know much about the country, and no one I knew had been there.
Accompanied by a close friend of mine, I landed in Saigon on 14 March 2010. We spent a few days in the city before heading south to Can Tho in the Mekong Delta and farther north to Nha Trang. Now, I did mention adventure, but I wouldn’t say I was intrepid. Let’s say the trip was more glampacking than backpacking, as we had a guide and a driver!
Fortunate timing – witnessing growth first hand
Back then, I didn’t know I had arrived in Vietnam at a pivotal moment. In 2010, the country was recovering from the effects of the crisis, and its nominal GDP was around US$147 billion. Fast forward to 2021, and that figure had more than doubled to US$362 billion. I highlight these numbers because when I visit Saigon today and reflect on my first impressions of the city, it’s easy to visualise the rapid economic growth I’ve been lucky enough to witness.
For instance, the 22-year-old version of me saw limited commercial activity with few international brands or companies. Shopping was still very much a mom-and-pop store experience. Of course, the situation is entirely different now. If you walk down the same streets, there are luxury brands, restaurant chains, modern supermarkets, and that most ubiquitous symbol of wealth aspiration – the Mercedes Benz cars (albeit still enveloped by weaving motorcycles).
Onwards and upwards – Saigon’s towering achievements
The skyline is radically different, too. Until recently, Saigon was a uniform, low-rise city of three-to-four-story apartment blocks interspersed with French colonial confections like the Opera House or the Disneyesque city hall and administrative offices (The old Presidential Palace is still worth a visit: imagine a 1960s secondary school with a penthouse decorated by Austin Powers, and you get the picture.)
However, much of the old city centre is now overshadowed by a forest of multi-story offices, commercial buildings and apartment blocks. The most neck straining of these is Landmark 81, which reaches an incredible 461 metres, and the Bitexco Financial Tower with its frisbee-shaped helipad that, to my knowledge, has never actually been used.
Tentative steps – moving closer to Vietnam
Near Notre Dame (the “hideous pink cathedral” in Graham Greene’s The Quiet American) are the headquarters of HSBC, which, in 2010, was already operating in Vietnam. The bank’s advertisements adorn airport jet bridges around the world, and I viewed it as a company that could allow me to work in far-flung places.
My hotel was located on Nguyen Hue street, right next to Sunwah Tower, one of the earliest modern office buildings in District 1. When I saw HSBC’s logo on its wall, I thought to myself, wouldn’t it be exciting to land a job in a dynamic market like Vietnam? When I returned to Finland, I looked at the bank’s recruitment page, but nothing was available (who knows, maybe they will drop me a job offer at some point!)
That didn’t put me off, though, and by 2014 I had inched closer to Vietnam by moving to Singapore to head up the Asian arm of the Finnish family office that eventually became Kenno. That said, I didn’t immediately revisit Saigon. I knew it had a fast-growing economy, but I also understood that it was a complicated place to invest. For someone without investment experience in Asia, it felt like a difficult place to start. Therefore, I wanted to explore the region first to learn as much as possible and decide where to focus my attention.
Doing the groundwork – gaining first-hand experience
Then, in 2016, a close friend, Petri Deryng from PYN Fund Management, among the most prominent investors in Vietnam, invited me on a trip to the country where he would meet the management teams of companies held in his portfolio. The timing was fortunate, as Vietnam’s economy, financial sector and stock market were on a more solid footing following a banking crisis in 2012.
That trip, taken in very different circumstances from my first, sparked my interest in the country from an investment perspective. I couldn’t believe how much had changed, and the meetings we attended made me realise there was a clear opportunity to find growth companies trading at a reasonable price. Furthermore, it quickly became clear that the Vietnam exchange had already gone through childhood and adolescence and was getting close to adulthood in terms of operating as a proper stock market.
I recently checked some numbers, and when I started investing in Asia, Vietnam’s stock-market capitalisation was just over US$54 billion. When I visited Saigon two years later, it had grown to US$86 billion; at the end of 2020, it touched US$191 billion. The pandemic and a regulatory crackdown in 2022 dented this figure, but not drastically, and at the end of December 2022, it still stood at US$223 billion.
A welcoming climate
It’s not only the streetscapes and stock market that have progressed. The workforce is maturing as well, and I have the pleasure of having three amazing Vietnamese colleagues on my team. Regardless of occupation, the Vietnamese have an open and entrepreneurial mindset. They have the same ambitions as people in any number of developed or emerging markets, and work is fun when everyone on the team has real drive and ambition.
The internet certainly plays a central role, as it gives the new generation access to vast amounts of information. This democratisation of knowledge means they are quickly catching up with their peers elsewhere, seeking the same education, qualifications, and certifications. There is also a hunger to learn English that is often humbling, given we often take our abilities with the language for granted. Positively, more international firms are entering the market and actively hiring local employees, introducing, for example, training programmes to help upgrade the workforce.
In tandem, I believe operating in Vietnam has become a lot easier. The country has entered into multiple free-trade agreements, and corporate legislation is more business friendly. That’s why big names like Apple and Lego have established a presence, the latter with a US$1 billion investment. Why? Because it’s an excellent place to do business.
Investors’ dilemma – gaining entry to Vietnam
Buying and selling shares in Vietnam is more of a challenge. It’s true that a growing number of local companies are familiar with foreign investors and our governance expectations. However, before we even reach that stage, there is still the problem of market access.
When I decided to invest in Vietnam, I struggled to find a private bank in Singapore that would act as my custodian, mainly because it involved too much paperwork (and providing the service wasn’t profitable for the banks). To my knowledge, this hasn’t really changed.
The market is only available to institutional investors with the expertise and institutional infrastructure required to obtain a securities trading code. Opening a personal-trading account is theoretically possible but complicated in practice. For example, transferring funds out of the country can get complicated when the bank asks you to come down to the branch (been there, done that).
Hurdles such as these still keep a lot of foreign capital out of the market.
Kenno – a gateway to the country
Steve Jobs said in his famous commencement speech that “you can’t connect the dots looking forward; you can only connect them looking backwards”. Looking back at the first decade of my career, I have to agree. It was never my plan to build a Vietnam-focused investment management business, but without my trip in 2010, the opportunity might not have been so obvious when I returned in 2016. I still love the feeling when I walk down the jet bridge at Changi Airport, and investing in emerging markets is an adventure that hasn’t gotten old.
Today, an essential part of Kenno’s value proposition is that we act as the partner that opens the door into this exciting market. We employ a local on-the-ground team that knows Vietnam’s companies inside out. This is crucial because subtleties and nuances often tell you more about the health of a business in Vietnam than its official accounts, and I get to work side-by-side with some of the most talented professionals in the market.
Another element of our value proposition is our long-term commitment to the market. The next five years will be incredibly exciting, even more so than the past five years. Vietnam has reached the point where more and more people are aware of its inherent potential and are looking for a way to profit from the opportunity. Kenno is in a unique position as a business because we’ve been preparing ourselves for many years.
Added to this are the Vietnamese themselves. They are so incredibly motivated and hungry for life and growth that it’s hard not to feel optimistic and feed off that energy. It’s fantastic for my team and firm to be part of something so special!