The Vietnam Fund returned +1.0% in April with an NAV of USD 1,735.79, a new all-time high, bringing the net return since inception to +73.6%. This represents an annualized return of +17.9% p.a. The April performance of the Ho Chi Minh City VN Index in USD was −0.6% while the Hanoi VH Index lost −1.4% (in USD terms). Since inception, the AFC Vietnam Fund has outperformed the VN and VH Indices by +42.6% and +51.8% respectively (in USD terms). The broad diversification of the fund’s portfolio resulted in a low annualised volatility of 8.96%, a high Sharpe ratio of 1.97, and a low correlation of the fund versus the MSCI World Index USD of 0.30, all based on monthly observations since inception.

The broader market was slightly lower in the first two weeks of April, awaiting first quarter 2017 company results, causing stocks to consolidate across the board with both indices declining slightly: HCMC dropped -0.6% and Hanoi went down by -1.4% in local currency terms. With most earnings announcements in the fund’s holdings already out, the NAV of the AFC Vietnam Fund increased by +1.0%.

Market developments

People who invest in Vietnam usually follow the so-called benchmark index HOSE (Ho Chi Minh City index), but we are always surprised about how many new and potential investors are considering buying ETFs in Vietnam. As we have tried to explain many times before, ETFs aren’t well-suited for Vietnam since they are unable to track the index and hence vastly underperform the market. This is mainly due to an already fully used foreign ownership quota in some of the blue chips, but also  a result of the inability to add newly listed index stocks right from the listing day because they often trade “limit-up” for the first few days without any meaningful turnover. Some ETF investment managers are creating their own benchmarks which they are then able to track, but this of course doesn’t make sense if their benchmark isn’t reflecting the market. Other well respected companies, such as MSCI for example, are defining their Vietnam index in a more realistic manner, but given their extreme overweight in a few stocks, it wouldn’t be ideal to use this index as a benchmark.