Private equity investment Framework and prospect for Vietnam

33 CHAPTER 3 -LESSONS FOR PRIVATE EQUITY INVESTMENT IN VIETNAM ...47 3.1 Lessons from natural characteristic o f private equity investm ent...47 3.2 Lessons for investors who are conside

V I E T N A M N A T I O N A L U N I V E R S I T Y , H A N O I

S C H O O L O F B U S I N E S S

N g u y e n D u c H a i

PRIVATE EQUITY INVESTMENT: FRAMEWORK

AND PROSPECT FOR VIETNAM

Major: Business Administration

ACKNOW LEDGEM ENTS i

ABSTRACT ii

T Ó M T Ẩ T iii

LIST OF A BBREV IA TIO N S vi

LIST OF TA BLES vii

LIST OF FIGURES viii

INTRODUCTION 1

1 The problem s 1

2 Objectives and A im s 1

3 Research questions 1

4 Scope of w ork 2

5 Data sources 2

6 Methods 2

7 Significance 3

8 Limitation 3

9 Expected results 3

10 O utline 3

CHAPTER 1 - LITERATURE R EV IEW 5

1.1 The concept of private equity 5

1.2 Type of Private Equity 6

1.2.1 Venture Capital 7

1.2.2 B uyout 7

1.3 Investing Structure 9

1.4 Size ranking 11

TABLE O F C O N T E N T S

IV

1.5 Private Equity Perform ance 12

1.5.1 J-cu rv e 12

1.5.2 Expected return 12

1.5.3 Real IRR o f Private Equity 13

1.6 Private Equity in emerging m arket 15

1.6.1 Private equity in investment p o o ls 15

1.6.2 Emerging m arket 17

CHAPTER 2 -PRIVATE EQUITY IN V IETN A M 23

2.1 Vietnam Investment C ontext 23

2.1.1 Robust growth r a te 23

2.1.2 Bright prospective 24

2.1.3 Young and grow labor force 25

2.2 Private Equity in V ietnam 26

2.2.1 Investment fund industry 26

2.2.2 Private equity market snapshot 30

2.2.3 Mekong C ap ital 33

CHAPTER 3 -LESSONS FOR PRIVATE EQUITY INVESTMENT IN VIETNAM 47

3.1 Lessons from natural characteristic o f private equity investm ent 47

3.2 Lessons for investors who are considering allocate his assets to private equity funds 48

3.3 Lesson for fund managers who are considering allocate his fund capital to private equity 51

BIBLIOGRAPHY 56

A PPEN D IX 58

L IST O F A B B R E V IA T IO N S PEI Private Equity Investment

EVCA EVCA - European Private Equity and Venture Capital

Association was established in 1983 and is based in Brussels EVCA represents the European private equity sector and promotes the asset class both within Europe and throughout the world

EMPEA EMPEA - Emerging Markets Private Equity Association.

EMPEA is a broad-based membership organization founded

in 2004 to focus on the emerging private equity markets of Africa, Asia, Central and Eastern Europe, Russia, Latin America, the M iddle East, and Russia EMPEA is comprised primarily o f private equity fund managers, but also includes institutional investors, service providers and others with an interest in the asset class

CEE Central and Eastern Europe

IRR Internal rate o f return

v i

LIST O F T A B L E S

Table 1-1 Beta, Standard deviation and Expected return 12

Table 1-2 Growth in Fund Raised 2005 - 2007 17

Table 1-3 Distribution o f Fund sizes for Funds with final closes in 2007 18

Table 2-1 Mekong's typical investee com panies 39

Table 4-1 Investment Fund results 61

LIST OF FIGURES

Figure 1.1 Venture Investment S tages 7

Figure 1.2 An Overview o f alternative investment 9

Figure 1.3 Principal means o f investing in Private Equity 9

Figure 1.4 The J-curve 12

Figure 1.5 Private Equity perform ance 14

Figure 1.6 Performance o f upper and lower quartile 15

Figure 1.7 Total investable Capital market- December, 20 0 6 16

Figure 1.8 Emerging markets Private Equity Fundraising Totals, 2003-2007 17

Figure 1.9 Stage of funds with final closes in 2007 19

Figure 1.10 Sector focus among funds with closes in 2007 20

Figure 1.11 Distribution o f EM PE Fundraising by Region, 2003 - 2007 ($US mn) 21

Figure 1.12 Emerging markets private equity fundraising totals by region, 2003 -2007 ($US m n) 21

Figure 1.13 Fundraising by country 22

Figure 2.1 The real GDP growth in 2006 23

Figure 2.2 Growth rate compare 24

Figure 2.3 GDP & inflation rate 25

Figure 2.4 Population growth 25

Figure 2.5 Vietnam's Demographic structure (% total population) 26

Figure 2.6 Fundraising in Vietnam 28

Figure 2.7 Fund type & strategy 28

Figure 2.8 Private equity fundraising in Vietnam 31

Figure 2.9 Mekong Fundraising, 2002 - 2007 33 Figure 2.10 Mekong enterprise fund performance, 2002 - 1H2008 36 Figure 2.11 Mekong Enterprise Fund, % capital allocation sta g e 37

1 The problems

Private Equity is a broad and complex asset class within the Alternative Investments Its market is structured with specialized Private Equity funds The investments in Private Equity are still fresh and attractive investment tool

in Vietnam but are strongly developing in emerging market like China, Thailand, and Indonesia etc The recent development in Vietnam stock market lead Private Equity Investment (PEI) is on the demand o f many investors Therefore in that context, the question o f how Private Equity invests need be answered

This thesis aim to study how to invest in Private Equity and outline some principals of PEI for investor

2 Objectives and Aims

The objectives o f this thesis is to study

• The basic concept o f Private Equity Investment

• The fact o f private equity investment in emerging market and Vietnam

• Opportunity and principal guidelines to invest in PEI for investors

With these above objectives, this thesis aims at giving a basic theoretical foundation for investors who are now considering in Private Equity Investment and then study the fact o f operation o f PEI in emerging market and Vietnam market

3 Research questions

The complete list of research questions is as follows:

• What are definitions, types, common features o f Private Equity?

• What are steps in Private Equity Investment?

• How did PEI perform?

• Describe the PEI industry and give a case study?

• What are withdrew lessons for fund managers and investors?

5 Data sources

For the theoretical part, data sources are textbooks, articles from internet As for the fact, the data sources are mainly from some PEI associations’ reports For the case Mekong capital, the figure and lesson are withdrawn from management interview

managers who are experience in private equity investment industry for interviewing.

Interview structure: The two longer interviews were conducted in a qualitative manner, but with somewhat specific questions and make sure that every topic o f interest was treated the interviewer followed a manual with the key subjects

The other limit is from case study method This method cannot cover all the heoretical issues o f Private Equity Investment Thus, later this case, this hesis only studies the overall performance o f PEI

CHAPTER 1 - LITERATURE REVIEW

CHAPTER 2 -PRIV A TE EQUITY

CHAPTER 3 - LESSONS FOR PRIVATE EQUITY INVESTM ENT IN VIETNAM

C H A P T E R 1 - L IT E R A T U R E R E V IE W

We start this paper by looking at the Private Equity asset class First, we give

a definition, type and investing structure in Private Equity Then, we look at some research result of its performance Finally, we will see how it impact in emerging market

1.1 The concept of private equity

Private equity is a small part o f the investment world, but is growing strongly After a sharp decline in capital committed following the bursting o f the telecommunications and technology bubble, private equity has seen an increase in capital commitments in recent periods The definition o f private equity is as follows:1

• A form o f financing that typically entails entrepreneurial funding, business expansion, business acquisitions, balance sheet restructuring

or the privatizing o f a public company

• Conducted generally outside the public securities markets

• Encompasses a profit participation by the general partner

• Often comes in the form o f a limited partnership

The definition of private equity illustrates that the asset class is very different than marketable securities Due to this fact, there are certain risks and considerations that need to be evaluated before an investment is made, and on

an on-going basis after an allocation has been implemented

- Illiquidity - Commitments to private market investments are usually in the form of limited partnerships, with terms o f 10 or more years There

1 S o u rce: V e n tu re X p e rt d e fin itio n

are no markets for these partnership interests and they cannot be liquidated or easily transferred This is a true long-term commitment.

- Volatility is Understated - Because most assets are valued at cost until a measurable event occurs, private capital investments appear to

be more stable in price than they actually are In addition, management fees and some losses are recognized early This gives rise to the “J curve effect.”

- Results Dependent on Management - The ultimate level o f returns received by investors is highly dependent on the skill o f the fund-of- funds manager and their access to good investment partnerships

- Time Commitment - The amount o f time Committees, Staff and Consultants must spend in monitoring private capital investments is significantly greater than with other asset classes Cost and complexity multiply over time

- Information Flows - Reports and performance data are available on only a quarterly basis and are usually lagged by a minimum o f 60 days Returns are calculated on an IRR basis and there are no passive benchmarks against which you can compare results

- Cash Flows - Are complex to manage and capital calls often have short notification periods and must be fulfilled on a timely basis

1.2 Type of Private Equity

T h e re a r e tw o ty p e s o f P r iv a te E q u ity : V e n tu r e C a p ita l a n d B u y o u t.

Venture represents investment in unquoted companies that are expected to go public This is what we mean by Private Equity in general We have 4 subcategories in the Venture market:

Figure 1.1 Venture Investment Stages

1.2.1 Venture Capital

•T h e business is o nly an idea a t this stage Financing is n e ed e d to s u pp o rt

th e e n tre p re n e u rs ' research on th e idea, m a rk et e v a lu a tio n , c o n s tru c tio n Seed ° f a s tra te g y , etc.

•T h e co m p an y was c re a te d and needs financing to s ta rt p ro du cing , d evelop

a m a rk e tin g s tra te g y a n d launch its products Start-up

Expansion

•This is th e g ro w th p h ase w h e re th e firm needs e x tra liq u id ity to fin a n c e its j

d e v e lo p m e n t Sales a re increasing, th e firm starts to be p ro fita b le and needs funds to s u p p o rt in ven to ries and accounts receivables.

h ave th e m a jo rity o f shares

Venture companies lack tangible assets that can be used as collateral for loan and thus their access to debt financing is very limited Investments in Private Equity are staged, so that the investor keeps the option to abandon the project

at each milestone and limits his risks

1.2.2 Buyout

Buyout represents investment that puts in public companies or their divisions which may want to go private A B u y o u t is, f o r in s ta n c e , th e p u r c h a s e o f

s h a r e s o f p u b l i c c o m p a n ie s b y a n e x te r n a l in v e s to r w ith th e a im o f ta k in g a

c o n tr o llin g in te r e s t in th a t fir m Buyout firms generally use a combination of their own funds and debt to pay for takeover.

- In a Leveraged Buyout, the acquirer takes out loans or bonds in the target’s name in order to get better financing conditions from the lenders and uses the cash flow o f the acquired company to pay them back It then seeks to improve performance by cutting expenses and usually sells the target company, often through initial public offering, within five years approximately

managers o f company raise funds to take control o f it

The difference between these two sectors o f Private Equity is that V e n tu re

c a p ita l is in v e s te d to ta k e a m in o r in te r e s t, w h ile B u y o u t is to b u y th e f i r m o r

to ta k e c o n tr o l o f it. Buyouts are less risky because the company is mature, its stock is publicly traded and also because it has a historical performance Also, the publicly traded stock makes exit strategies easier The term “exit” is the means by which a Private Equity investor is able to realize its investment in a company -by an initial public offering, a trade sale, selling to another Private Equity firm or a company buy-back Private Equity is a particular asset class

in the category o f Alternative Investments, as shown in this Figure below The name is “Alternative Investments” as opposed to “Traditional Investments” which refer to stocks and bonds

Figure 1.2 An Overview of alternative investment

A lternative Investm ents

IMS

* Emerging Markets

m Wu

; ^ Interest Rates

; Natural Resources

‘ » It a» wSSl'iíí '«

1.3 Investing Structure

There are three ways o f investing in Private Equity as shown in Figure 1.3

Principal means of investing in Private Equity An investor can:

1 Directly invest in private companies

2 Invest in a Private Equity fund who will then choose in which companies to invest in and how much

3 Invest in a fund o f funds who will then invest in Private Equity funds

Figure 1.3 Principal means of investing in Private Equity

■> Company

Private Equity funds take in general the form o f Limited Partnerships The investment manager o f a Limited Partnership is called the General Partner or Venture Capitalist, whereas the members o f the Limited Partnership are the

Limited Partners The General Partner's main tasks are to conduct due diligence, to structure financial contracts, to monitor investments, to provide resources for portfolio finns and to build in exit strategies for investors Private Equity funds can specialize themselves by industry, geography, stage

o f financing or size of com panies invested

In such a governance structure, there is a moral hazard problem which results from the asymmetric information between the Limited Partners and the manager o f the fund The manager's compensation should be set up so as to give him the right incentive The General Partner has a fixed salary around

1 % o f the committed capital plus a share o f the fund's performance which is generally 20% and is called the carried interest A Private Equity fund charges

in general a fee between 0.75% and 1.25%

When selecting an investment, the manager faces an adverse selection problem since he doesn't know which firms are performing well and which are not So, his ability to select the right investment will be crucial for the fund's performance One way to lower the asymmetry o f information in the Private Equity market is the due diligence made by each firm who demands financing

The funds o f funds, instead o f investing directly in companies, invest in other Private Equity funds This enables the investor to have a wide exposure on the sector and, thus, offers m ore diversification with cost effectiveness A fund of funds may also be attractive to an individual, because some Private Equity funds may be closed to them Due to its large investment size, a fund o f funds

is a preferred source o f financing for Private Equity funds, since they do not have to deal with a large num ber o f small investors

A fund o f funds charges a management fee between 0.75% and 1.25% p.a over the Private Equity fund usual fee For an investor, the trade-off is between investing in a fund o f funds and doing his own Private Equity allocation Here, the key variable for the decision is the size o f the investment.

The direct investment strategy is not advisable for non-professional investors

As we said before, there is a strong asymmetry in information and thus, careful study o f each company is needed for a sound investment For an individual investor desiring to invest in Private Equity to diversify its portfolio for example, we would recommend him to invest in a fund o f funds

1.5 Private Equity Performance

1.5.1 J-curve

The investment in Private Equity is not done at once like for a classic stock The investor has generally a negative cash-flow during the first years of the investment and then starts to get his return This is illustrated in Figure 1.4 The J-curve

Figure 1.4 The J-curve

I m * « I ru n d a n n u al <;.ish tlo w s to investors

1.5.2 Expected return

An independent research o f Ennisknupp showed that the expected return o f Private Equity is excess all other investment types but following by the highest beta and standard deviation

Table 1-1 Beta, Standard deviation and Expected return

Asset class Beta w ith expected standard expected

respect to arithmetic deviation compounded/

return

Additionally, to account for the expected return compensation from investments on private markets, the arithmetic expected return for private equity is adjusted upward from 10.7% (based on the Global CAPM) to 13.7% Consequently, the compounded/geometric return for private equity would increase from 6.2% to 9.2% The 3% represents common industry expectation for the additional return provided by private equity investments over public equity.

1.5.3 Real IRR o f Private Equity

The generally adopted measure is the Internal Rate o f Return (IRR) based on the cash inflows and outflows and the final net asset value, although we know that this measure is not relevant in some cases For this measure to work properly, the exact timing o f the investments has to be known Obtaining this data is a difficult task, since the general sources like Venture Economics or the EVCA provide them only at an aggregate level

Figure 1.5 Private Equity performance

Investment Horizon Returns as o f 31 Decem ber 2004 (%) Stage 1 year 3 year 5 year 10 year

[Source: Ludovic Phalippou and M aurizio Zollo, 2005 - The Performance o f Private

Equity Funds, page 11 ]

In Figure 1.5 Private Equity performance, we see the recent returns o f Private Equity and the global impact o f the Internet bubble which decreased the 3 year All Private Equity IRR to -2.3 % and 5 year to only 1.9% The returns are particularly low, especially for the Early Stage which is the riskier category

As we will see in the following, Private Equity is a long term investment, not only because a fund is created for 10 years on average but also because excess return is obtained only after 10 years This is why, when we look at Private Equity returns, we generally consider the 10-year return, which is 9.8% in our case

The choice o f top quartile fund managers is particularly important in Private Equity The spread observed between good and bad managers is significantly higher in Private Equity than in quoted equity or bonds There is a 15% difference in returns from the lower to upper quartile, whereas this spread is about 1% for bond fund managers and 3% for public equities Moreover, a top

Venture capital buyouts all private equity

[Source: Ludovic Phalippou and M aurizio Zollo, 2005 - The Perform ance o f Private

Equity Funds, page 15]

W e s e e in F i g u r e 1 6 P e r f o r m a n c e o f u p p e r a n d l o w e r q u a r t ile t h a t t h e l o w e r

q u a r t ile h a d r e tu r n s l o w e r t h a n t h e U S T - B i l l T h u s , w h e n b u i l d i n g a p o r t f o l io

o f P r iv a te E q u it y , n o t o n l y s h o u l d w e c o n s i d e r t h e w e i g h t s o f o u r a l lo c a t io n

b u t a l s o t h e c h o i c e o f b e s t f u n d m a n a g e r s

1.6 Private Equity in emerging market

1.6.1 Private equity in investment pools

T h e P r iv a te E q u ity is a s m a l l a s s e t c la s s : P r iv a t e e q u i t y c o n s t i t u t e s l e s s th a n 1% o f t h e o p p o r t u n it y s e t T h e g r a p h b e l o w s h o w s w h a t p o r t io n o f t h e

i n v e s t a b l e u n i v e r s e p r iv a t e e q u i t y , a n d o t h e r a s s e t c l a s s e s , r e p r e s e n t s

Figure 1.7 Total investable Capital market- December, 2006

all other stocks

2 2.2%

Emerging market stocks USstocks

3.9%

Emerging market debt

is because Private Equity is a temporary capital for young firms If the company is successful and achieves growth, then it goes public Moreover, every investor looks for a way to exit to gain a return on his investment

The Private Equity Industry has grown dramatically in recent years: as more and more investors are entering the asset class and those already investing have continued to increase their allocations

The latest figures indicate that in excess o f $600 million was raised over the course o f 2008 making it another record year for the industry However, these bum per figures do not indicate that private equity fundraising has becom e an easier prospect; if anything the opposite is the case

1.6.2 Emerging market

Fundraising issue:

The dramatic growth o f fundraising for private equity in emerging markets continued unabated in 2007 Two hundred and four private equity funds focused on emerging markets raised US$59.2 billion in capital commitments This figure represents a 78% increase over the US$33.2 billion raised by 162 funds in 2006, and a 17-fold increase over the US$3.5 billion raised in 2003

Figure 1.8 Emerging markets Private Equity Fundraising Totals,

[Source: EMPE, 2007 - Em erging market Private Equity 2007 Fundraising Review,

Emerging market Private Equity Association, Page 6]

Table 1-2 Growth in Fund Raised 2005 - 2007Years Emerging CEE/Russia Latin Africa Middle Pan- Total

2005 - 2006 2 6 % 2 1 % 1 0 9 % 1 9 7 % 5 4 % - 2 9 % 2 9 %

New entrants included both u s and European private equity managers turning

to Asia and Central and Eastern Europe, and homegrown funds in the Middle East and Latin America Fund sizes grew more than 50%), with funds holding

Ị Đ A I H O C Q U Ộ C G IA HÀ NỘI

final closes in 2007 raising on average US$426 million versus US$272 million in 2006 Among closed funds, 54% held final closes at US$250 million or under, compared with 65% in 2006.

Fund raising size

As in 2006, the majority o f funds that achieved final closes in 2007 raised US$250 million or less, however this portion o f the EM PE landscape decreased from 65% o f funds in 2006 to only 54% in 2007 In 2007, 19 funds

in the m arket raised US$ 1 billion or more O f these 19 funds, 17 achieved final closes during 2007

Table 1-3 Distribution of Fund sizes for Funds with final closes in 2007

Size of funds with final 2007, $US m Cummulated

closes No.Funds Total

Capital raised (EOY2007)

Emerging m arket Private Equity Association, Page 5]

O f the 204 funds that held closes in 2007, 133 achieved final closes These funds exceeded their collective US$49 billion fundraising target by 18% or approximately US$8 billion The 71 funds that held first closes collectively raised US$10 billion as o f December 31, 2007, against a total stated target o f US$15.1 billion O f these 71 funds, 27 were focused on Asia with a collective fundraising goal o f US$4.4 billion Eight Middle East funds had a collective goal o f US$4.2 billion

Stage of funds

H alf o f the 204 funds with closes in 2007 targeted mainly growth opportunities, compared to only 25% o f funds in 2006 Twenty-five percent were venture capital funds, 21% focused on buyouts, while the remaining 7% were mezzanine funds Funds targeting Asia were mostly focused on growth and venture, while CEE/Russia had a heavier focus on buyouts This is consistent with fund focus trends in 2006, where 53% o f CEE funds were buyout-focused, and 70% o f Asian funds were growth or venture

Figure 1.9 Stage of funds with final closes in 2007

Growth, 51%

[Source: EMPE, 2007 - Emerging market Private Equity 2007 Fundraising Review,

Emerging m arket Private Equity Association, Page 10]

Sector focus

As in 2006, the majority o f funds did not have an explicit primary sector preference O f funds in the market, 58% were generalist in strategy (representing 66% o f capital raised) Another 17% were focused on technology, while eight funds, or 4% o f the universe and 6% o f the capital, and were primarily investing in the infrastructure sector

Figure 1.10 Sector focus among funds with closes in 2007

[Source: EMPE, 2007 - Em erging market Private Equity 2007 Fundraising Review,

Em erging market Private Equity Association, Page 10]

Fund raising bv region

Emerging Asia remained the premier destination for capital commitments, with US$28.7 billion in 2007, or roughly 49% o f total fresh capital raised, and 59% o f the U S $117 billion raised since 2003 Capital raised by Asia-focused funds represented an increase o f 48% over 2006’s US$19.4 billion raised

Figure 1.11 Distribution of EM PE Fundraising by Region, 2003 - 2007

($USmn)

Latin America Africa & Middle

& Caribbean East

Africa U 791

L jt A n i& C a r ib b e a n

2,711 1.777

[ m e r g in g Asia

WA 14,629

W 2007 l i 2006 W 2005 ■ 2004 « 2 0 0 3

[Source: EMPE, 2007 - Emerging market Private Equity 2007 Fundraising Review,

Emerging market Private Equity Association, Page 11 ]

As in previous years, Asia drew the greatest share o f fresh capital raised in

2007 Within Asia, fundraising activity was concentrated on regional funds,

28,668

SU S m

raising US$19.4 billion, followed by funds dedicated to investments in India

or China, collectively raising US$8.4 billion The continued surge in Asian fundraising was fueled in large part by the growing sizes o f funds focused on Asia In 2006, 93 funds raised US$19.4 billion, 98 funds raised US$28.7 billion while in 2007,— adifference per fund o f approximately US$85 million Ten o f the funds in the market in 2007 raised US$1 billion or more as o f December 2007

Figure 1.13 Fundraising by country

China (33)

3 8 9 0

[Source: EMPE, 2007 - Em erging m arket Private Equity 2007 Fundraising Review,

Emerging market Private Equity A ssociation, Page 12]

CHAPTER 2 -PRIVATE EQUITY IN VIETNAM

In this part, the paper will look at Vietnam Investment context and then take a research tour for current investment funds in Vietnam

2.1 Vietnam Investment Context

Vietnam now is considering as an emerging tiger of Asia Just one year after joining WTO, Vietnam rapidly became attractive destination o f all dynamic investors This result comes along by some fundamental factors in macro economics view:

2 / / Robust growth rate

Vietnam's economic growth rate has in the recent past been second only to China in Asia, averaging 7.4% for the period 2000-2006 compared to China's 9.5%o and India's 6.7%

Figure 2.1 The real GDP growth in 2006

14.0%

11.6%

[Source: Deutsche Bank, Investment Report 2007 - 'Understanding Vietnam, page 3]

On the other hand, its development level is more like India's with nominal GDP per capita for 2006 estimated at USD 715, close to India's USD 765 and

less than half o f China's nearly USD 2,000 In comparison, Vietnam is as poor

as India, but is growing at almost the same speed as China (India’s growth has accelerated, though)

Figure 2.2 Growth rate compare

(real GDP growth, CAGR 2000 - 2006, %)

2020, V ietnam ’s GDP per capita will have reached approximately the same level as C hina’s today

Figure 2.3 GDP & inflation rate

2.1.3 Young and grow labor force

Vietnam population growth is the third ranking compare to other neighbors

Figure 2.4 Population growth

[Source: Global Economics Paper No 165 - Vietnam : The Next Asian Tiger In the Making,

page 5]

With very young population, 65% population aged ranges from 15 - 64

Figure 2.5 Vietnam's Demographic structure (% total population)

P opulation

ag ed 15 - 64 64%

[Source: Global Economics Paper No 165 - Vietnam: The Next Asian Tiger In the Making,

page 5]

In long term perspective Vietnam has been the attractive destination for investor who wants to gain significant profit along with the development of this country In this opportunity context, we believe that private equity will gain significant consideration and development in near future This fact is not only proved by attractive characteristic o f Private Equity as its amazing performance but also by its active contribution to business activities o f investee companies

2.2 Private Equity in Vietnam

2.2.1 Investment fu n d industry

There are a number o f investment funds focusing primarily on Vietnam at the present time Broadly, the funds operating primarily in Vietnam can be categorized as follows:

Specialty group Typical funds

Bank Invest’s P r iv a te E q u ity N e w M a r k e ts (PENM )

M ekong Capital's M e k o n g E n te r p r ise F u n d , L td

M ekong Capital's M e k o n g E n te r p r ise F u n d II, L td

Ban Viet C apital’s B a n V ie t P h a r m a c y I n v e s tm e n t F u n d

L im ited

Dragon Capital M anagement's V ie tn a m D r a g o n F u n d e tc