Customer relationship management in securities company the case of bao viet securities company

PRIVATE EQUITY FUND: FRAMEWORK AND PROSPECT FOR VIETNAM Nguyen Duc Hai MBA Candidate, 2005 – 2007 School of Business Vietnam National University, Hanoi Supervisor: Nguyen Van Dinh, Assoc

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Nguyen Duc Hai

PRIVATE EQUITY INVESTMENT: FRAMEWORK AND PROSPECT FOR

VIETNAM

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

SUPERVISORS: DR NGUYEN VAN DINH

HA NGUYEN, MBA

During my study, I have received many helps from my supervisors, my family,

my colleagues and my classmate

Firstly, I would like to express my sincerely thanks to Mr Nguyen Hai Ha, Mekong Capital’ ex-investment manager, and my boss now, for his suggestions and supports I also would like to thank to other colleagues at Vietnam Equity Holding fund for their advices and contributions to my thesis.

To my supervisors, I would like to give my deeply thanks to Mr Ha Nguyen for his time to instruct me and give me valuable suggestions I also would like to offer my special thanks to Dr Nguyen Van Dinh for his encouragement to complete the thesis I also would like to thank Ms Nguyen Hong Ha, Ms Nguyen Thu Trang and others HSB faculty members for their helps and supports.

Finally, I would like to send my heartfelt thanks to my family members, my classmates for their supports and encouragements.

PRIVATE EQUITY FUND: FRAMEWORK AND PROSPECT FOR VIETNAM

Nguyen Duc Hai

MBA Candidate, 2005 – 2007 School of Business Vietnam National University, Hanoi

Supervisor: Nguyen Van Dinh, Assoc.Prof.,PhD

Ha Nguyen, MBA

My thesis aims to answer the question: how Private Equity Fund invests and to provide some frameworks & guidelines for who are interesting in this investment vehicle.

First, the author illustrates the Private Equity industry, its structure, its researched framework and its activities in emerging countries

Second, the thesis will study and research the fact of Private Equity industry in Vietnam The author also chooses Mekong Capital as a snapshot to know what a typical private equity fund in Vietnam does and then withdraw some operational experiences from its experts.

Third, the thesis will provide some lessons which could be applied for investing

to Private Equity in Vietnam for investment managers, who are managing fund and considering to allocate a part of fund assets to Private Equity, investors who are considering to invest to private equity fund.

TÓM TẮT

QUỸ ĐẦU TƯ TƯ NHẤN: CẤU TRÚC KHUNG VÀ TRIỂN

VỌNG CHO THỊ TRƯỜNG VIỆT NAM

Nguyễn Đức Hải

Khoa Quản trị kinh doanh – Đại học Quốc gia Hà nội

Người hướng dẫn: PGS.TS Nguyễn Văn Định

ThS Hà Nguyên

Tháng 10 năm 2008, 70 trang Luận văn này nhằm giải đáp cho câu hỏi: quỹ đầu tư tư nhân đầu tư như thế nào

và cung cấp một vài khung và một số chỉ dẫn cho những ai quan tâm tới loại hình đầu tư này.

Đầu tiên, tác giả mô tả minh họa về ngành đầu tư tư nhân, cấu trúc, các nghiên cứu khung và các hoạt động của nó ở các thị trường mới nổi.

Sau đó, bài viết sẽ tiến hành nghiên cứu thực tế về ngành quản lý đầu tư tư nhân

ở Việt nam Người viết cũng chọn Mekong capital làm một bức tranh cụ thể để nghiên cứu và rút ra thêm các bài học kinh nghiệm về quản lý quỹ đầu tư tư nhân

Cuối cùng, bài viết sẽ liệt kê một số bài học có thể ứng dụng cho loại hình đầu tư

tư nhân ở Việt nam cho các nhà quản lý đầu tư, những người đang quản lý các quỹ đầu tư và đang có ý định đầu tư vào loại hình đầu tư tư nhân và những nhà đầu tư, những người đang muốn đầu tư vào các quỹ đầu tư tư nhân.

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i

ABSTRACT ii

TÓM TẮT iii

LIST OF ABBREVIATIONS vi

LIST OF TABLES vii

LIST OF FIGURES viii

INTRODUCTION 1

1 The problems 1

2 Objectives and Aims 1

3 Research questions 1

4 Scope of work 2

5 Data sources 2

6 Methods 2

7 Significance 3

8 Limitation 3

9 Expected results 3

10 Outline 3

CHAPTER 1 – LITERATURE REVIEW 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 Buyout 7

1.3 Investing Structure 9

1.4 Size ranking 11

1.5 Private Equity Performance 12

1.5.1 J-curve 12

1.5.2 Expected return 12

1.5.3 Real IRR of Private Equity 13

1.6 Private Equity in emerging market 15

1.6.1 Private equity in investment pools 15

1.6.2 Emerging market 17

CHAPTER 2 –PRIVATE EQUITY IN VIETNAM 23

2.1 Vietnam Investment Context 23

2.1.1 Robust growth rate 23

2.1.2 Bright prospective 24

2.1.3 Young and grow labor force 25

2.2 Private Equity in Vietnam 26

2.2.1 Investment fund industry 26

2.2.2 Private equity market snapshot 30

2.2.3 Mekong Capital 33

CHAPTER 3 –LESSONS FOR PRIVATE EQUITY INVESTMENT IN VIETNAM 47

3.1 Lessons from natural characteristic of private equity investment 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

APPENDIX 58

LIST OF ABBREVIATIONS

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 Middle East, and Russia EMPEA is comprised primarily of private equity fund managers, but also includes institutional investors, service providers and others with an interest in the asset class.

LIST OF TABLES

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

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

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

Table 2-1 Mekong's typical investee companies 39

Table 4-1 Investment Fund results 61

LIST OF FIGURES

Figure 1.1 Venture Investment Stages 7

Figure 1.2 An Overview of alternative investment 9

Figure 1.3 Principal means of investing in Private Equity 9

Figure 1.4 The J-curve 12

Figure 1.5 Private Equity performance 14

Figure 1.6 Performance of upper and lower quartile 15

Figure 1.7 Total investable Capital market- December, 2006 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 of EM PE Fundraising by Region, 2003 - 2007 ($US mn) 21

Figure 1.12 Emerging markets private equity fundraising totals by region, 2003 -2007 ($US mn) 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 stage 37

1 The problems

Private Equity is a broad and complex asset class within the AlternativeInvestments Its market is structured with specialized Private Equity funds Theinvestments in Private Equity are still fresh and attractive investment tool inVietnam but are strongly developing in emerging market like China, Thailand,and Indonesia etc The recent development in Vietnam stock market leadPrivate Equity Investment (PEI) is on the demand of many investors Therefore

in that context, the question of how Private Equity invests need be answered

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

2 Objectives and Aims

The objectives of this thesis is to study

• The basic concept of Private Equity Investment

• The fact of 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 theoreticalfoundation for investors who are now considering in Private Equity Investmentand then study the fact of operation of PEI in emerging market and Vietnammarket

3 Research questions

The complete list of research questions is as follows:

• What are definitions, types, common features of Private Equity?

• What are steps in Private Equity Investment?

• 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 Asfor the fact, the data sources are mainly from some PEI associations’ reports.For the case Mekong capital, the figure and lesson are withdrawn frommanagement interview

6 Methods

The thesis uses the empirical method, case study in the study process It alsouse interview as a qualitative investigation

Choice of interviewees: The choice of interviewees was a rigid process and

very important since if the interviewee does not hold the right knowledge theentire thesis might end up useless The author chooses some investment

managers who are experience in private equity investment industry forinterviewing.

Interview structure: The two longer interviews were conducted in a

qualitative manner, but with somewhat specific questions and make sure thatevery topic of interest was treated the interviewer followed a manual with thekey subjects

The other limit is from case study method This method cannot cover all thetheoretical issues of Private Equity Investment Thus, later this case, this thesisonly studies the overall performance of PEI

CHAPTER 1 – LITERATURE REVIEW

CHAPTER 2 –PRIVATE EQUITY

CHAPTER 3 – LESSONS FOR PRIVATE EQUITY INVESTMENT IN VIETNAM

CHAPTER 1 – LITERATURE REVIEW

We start this paper by looking at the Private Equity asset class First, we give adefinition, type and investing structure in Private Equity Then, we look atsome research result of its performance Finally, we will see how it impact inemerging market

1.1 The concept of private equity

Private equity is a small part of the investment world, but is growing strongly.After a sharp decline in capital committed following the bursting of thetelecommunications and technology bubble, private equity has seen an increase

in capital commitments in recent periods The definition of private equity is asfollows:1

• A form of financing that typically entails entrepreneurial funding,business expansion, business acquisitions, balance sheet restructuring or the privatizing

of a public company

• Conducted generally outside the public securities markets

• Encompasses a profit participation by the general partner

• Often comes in the form of a limited partnership

The definition of private equity illustrates that the asset class is very differentthan marketable securities Due to this fact, there are certain risks andconsiderations 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 of 10 or more years There

1 Source: VentureXpert definition

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 pricethan they actually are In addition, management fees and some losses are recognizedearly This gives rise to the “J curve effect.”

- Results Dependent on Management – The ultimate level of returns

received by investors is highly dependent on the skill of the fund-of-funds manager andtheir access to good investment partnerships

- Time Commitment – The amount of time Committees, Staff and

Consultants must spend in monitoring private capital investments is significantly greaterthan 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 of 60 days Returns are calculated

on an IRR basis and there are no passive benchmarks against which you can compareresults

- 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

There are two types of Private Equity: Venture Capital and Buyout.

1.2.1 Venture Capital

Venture represents investment in unquoted companies that are expected to go

public This is what we mean by Private Equity in general We have 4subcategories in the Venture market:

Figure 1.1 Venture Investment Stages

Venture companies lack tangible assets that can be used as collateral for loanand thus their access to debt financing is very limited Investments in PrivateEquity 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 Buyout is, for instance, the purchase of shares of public companies by an external investor with the aim of taking a

controlling interest in that firm 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 thecash flow of the acquired company to pay them back It then seeks to improveperformance by cutting expenses and usually sells the target company, often throughinitial public offering, within five years approximately

- Management Buyouts follow the same goal, where a part of the managers

of company raise funds to take control of it

The difference between these two sectors of Private Equity is that Venture capital is invested to take a minor interest, while Buyout is to buy the firm or to take control of 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 themeans by which a Private Equity investor is able to realize its investment in acompany -by an initial public offering, a trade sale, selling to another PrivateEquity firm or a company buy-back Private Equity is a particular asset class inthe category of Alternative Investments, as shown in this Figure below Thename is “Alternative Investments” as opposed to “Traditional Investments”which refer to stocks and bonds

Figure 1.2 An Overview of alternative investment

1.3 Investing Structure

There are three ways of 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 of funds who will then invest in Private Equity funds

Figure 1.3 Principal means of investing in Private Equity

Private Equity funds take in general the form of Limited Partnerships Theinvestment manager of a Limited Partnership is called the General Partner orVenture Capitalist, whereas the members of the Limited Partnership are the

Limited Partners The General Partner's main tasks are to conduct duediligence, to structure financial contracts, to monitor investments, to provideresources for portfolio firms and to build in exit strategies for investors PrivateEquity funds can specialize themselves by industry, geography, stage offinancing or size of companies invested.

In such a governance structure, there is a moral hazard problem which resultsfrom the asymmetric information between the Limited Partners and themanager of the fund The manager's compensation should be set up so as togive him the right incentive The General Partner has a fixed salary around 1%

of the committed capital plus a share of the fund's performance which isgenerally 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 problemsince 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'sperformance One way to lower the asymmetry of information in the PrivateEquity market is the due diligence made by each firm who demands financing

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

is a preferred source of financing for Private Equity funds, since they do nothave to deal with a large number of small investors

A fund of funds charges a management fee between 0.75% and 1.25% p.a overthe Private Equity fund usual fee For an investor, the trade-off is betweeninvesting in a fund of funds and doing his own Private Equity allocation Here,the key variable for the decision is the size of 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, carefulstudy of each company is needed for a sound investment For an individualinvestor desiring to invest in Private Equity to diversify its portfolio forexample, we would recommend him to invest in a fund of funds

Private Equity buyout

Small 0-250 $MillMedium 250-500 $MillLarge 500-1,000 $MillMega 1,000 $Mill+

2 VentureXpert Glossary

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

1.5.2 Expected return

An independent research of Ennisknupp showed that the expected return of

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

return

Non US Equity 1.77 8.4 18.3 6.7

[Source: Ennisknupp, updated July 2008 - ENNISKNUPP capital markets

modeling assumption, page 5]

The expected compounded/geometric return is the relevant assumption from

the point of view of a long term investor It is the return that the asset will

experience over the long-term The geometric average return is lower than the

arithmetic average return whenever there is uncertainty (which is measured by

standard deviation) in annual returns

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 of Private Equity

The generally adopted measure is the Internal Rate of 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 of 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

[Source: Ludovic Phalippou and Maurizio Zollo, 2005 - The Performance of

Private Equity Funds, page 11]

In Figure 1.5 Private Equity performance, we see the recent returns of PrivateEquity and the global impact of the Internet bubble which decreased the 3 yearAll Private Equity IRR to -2.3 % and 5 year to only 1.9% The returns areparticularly 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, notonly because a fund is created for 10 years on average but also because excessreturn is obtained only after 10 years This is why, when we look at PrivateEquity returns, we generally consider the 10-year return, which is 9.8% in ourcase

The choice of top quartile fund managers is particularly important in PrivateEquity The spread observed between good and bad managers is significantlyhigher 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 isabout 1% for bond fund managers and 3% for public equities Moreover, a top

quartile fund manager tends to keep having the best returns As we can see inFigure 1.6 Performance of upper and lower quartile, access to top partnerships

is critical

Figure 1.6 Performance of upper and lower quartile

[Source: Ludovic Phalippou and Maurizio Zollo, 2005 - The Performance of

Private Equity Funds, page 15]

We see in Figure 1.6 Performance of upper and lower quartile that the lowerquartile had returns lower than the US T-Bill Thus, when building a portfolio

of Private Equity, not only should we consider the weights of our allocation butalso the choice of best fund managers

1.6 Private Equity in emerging market

1.6.1 Private equity in investment pools

The Private Equity is a small asset class: Private equity constitutes less than

1% of the opportunity set The graph below shows what portion of theinvestable universe private equity, and other asset classes, represents

Figure 1.7 Total investable Capital market- December, 2006

[Source: Ennisknupp, updated January 2008 - ENNISKNUPP capital markets

modeling assumption, page 2]

As we see in Figure 1.7 Total investable Capital market, Private Equity,named as Private Capital, represents only 0.8% of the total world investablemarket It is the lowest market with a total capitalization of $827 billion This

is because Private Equity is a temporary capital for young firms If thecompany 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 havecontinued to increase their allocations

The latest figures indicate that in excess of $600 million was raised over thecourse of 2008 making it another record year for the industry However, thesebumper figures do not indicate that private equity fundraising has become aneasier prospect; if anything the opposite is the case

1.6.2 Emerging market

Fundraising issue:

The dramatic growth of 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, 2003-2007

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

Review, Emerging market Private Equity Association, Page 6]

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

New entrants included both US 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

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 of funds that achieved final closes in 2007 raised

US$250 million or less, however this portion of the EM PE landscape

decreased from 65% of funds in 2006 to only 54% in 2007 In 2007, 19 funds

in the market raised US$ 1 billion or more Of 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

Capital raised (EOY2007)

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

Review, Emerging market Private Equity Association, Page 5]

Of 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 of December 31, 2007, against a total stated target of

US$15.1 billion Of these 71 funds, 27 were focused on Asia with a collective

fundraising goal of US$4.4 billion Eight Middle East funds had a collective

goal of US$4.2 billion

Stage of funds

Half of the 204 funds with closes in 2007 targeted mainly growthopportunities, compared to only 25% of funds in 2006 Twenty-five percentwere venture capital funds, 21% focused on buyouts, while the remaining 7%were mezzanine funds Funds targeting Asia were mostly focused on growthand venture, while CEE/Russia had a heavier focus on buyouts This isconsistent with fund focus trends in 2006, where 53% of CEE funds werebuyout-focused, and 70% of Asian funds were growth or venture

Figure 1.9 Stage of funds with final closes in 2007

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

Review, Emerging market Private Equity Association, Page 10]

Sector focus

As in 2006, the majority of funds did not have an explicit primary sectorpreference Of funds in the market, 58% were generalist in strategy(representing 66% of capital raised) Another 17% were focused ontechnology, while eight funds, or 4% of the universe and 6% of the capital, andwere primarily investing in the infrastructure sector

Figure 1.10 Sector focus among funds with closes in 2007

Sector

Generalist

Sector strategy

Technology Infrastructure Energy Natural resources Financial service Industrials/

Manufacturing Consumer Agriculture/Agribusine ss

Environment Other/NA TOTAL

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

Review, Emerging market Private Equity Association, Page 10]

Fund raising by region

Emerging Asia remained the premier destination for capital commitments, withUS$28.7 billion in 2007, or roughly 49% of total fresh capital raised, and 59%

of the US$117 billion raised since 2003 Capital raised by Asia-focused fundsrepresented an increase of 48% over 2006’s US$19.4 billion raised

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

($US mn)

Figure 1.12 Emerging markets private equity fundraising totals by

region, 2003 - 2007 ($US mn)

[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 of fresh capital raised in

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

raising US$19.4 billion, followed by funds dedicated to investments in India orChina, collectively raising US$8.4 billion The continued surge in Asianfundraising was fueled in large part by the growing sizes of funds focused onAsia In 2006, 93 funds raised US$19.4 billion, 98 funds raised US$28.7billion while in 2007,—adifference per fund of approximately US$85 million.Ten of the funds in the market in 2007 raised US$1 billion or more as ofDecember 2007.

Figure 1.13 Fundraising by country

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

Review, Emerging market Private Equity Association, Page 12]

CHAPTER 2 –PRIVATE EQUITY IN VIETNAM

In this part, the paper will look at Vietnam Investment context and then take aresearch 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 afterjoining WTO, Vietnam rapidly became attractive destination of all dynamicinvestors This result comes along by some fundamental factors in macroeconomics view:

2.1.1 Robust growth rate

Vietnam's economic growth rate has in the recent past been second only toChina in Asia, averaging 7.4% for the period 2000-2006 compared to China's9.5% and India's 6.7%

Figure 2.1 The real GDP growth in 2006

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

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

less than half of 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 hasaccelerated, though)

Figure 2.2 Growth rate compare

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

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

2.1.2 Bright prospective

According to Deutsche Bank Research's Formel-G model, which forecasts real

GDP growth for more than 30 industrial countries and emerging markets until

2020, Vietnam is likely to grow at about the same speed as India and China inthe next one and a half decades − at an estimated 5.7% p.a Hence, in 2020,Vietnam’s GDP per capita will have reached approximately the same level asChina’s today

Figure 2.3 GDP & inflation rate

[Source: gso.gov.vn]

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