Dragon Capital has established itself firmly as an investor with strong credentials in one of Asia’s most exciting investment locations, Vietnam. It has more than $1 billion in assets under management and invests across fixed income, public equity, real estate infrastructure and private equity.
Its chief executive and co-founder Dominic Scriven, who received an Order of the British Empire for his contribution to the development of the financial sector in Vietnam, answers questions about Dragon Capital, Vietnam, and the opportunities and prospects for investors in the country and the Greater Mekong Sub-region.
Can you tell us the history behind Dragon Capital?
I co-founded Dragon Capital in 1994 at a time when a market economy was still in its infancy. Most of the population was still wearing tropical Mao outfits. But there was a real commitment from the government and the populace to liberalise and embrace western markets. There was a burst of enthusiasm post 1994 and Dragon Capital was well placed to help with the country’s fast economic development.
The following year we launched our first investment fund with $16 million behind it. The Vietnamese economy grew rapidly over the next few years, although there were also difficult times, such as the Asian financial crisis of 1997. What was important was building trust with the Vietnamese and to show that we were committed to the country. This I believe we have done and it is reflected in the growth of assets under management and the influence we have had in moving the country to a more market-focused economy. I think we have certainly shown our commitment to the country and its economy.
What attracted you to Vietnam?
I had started to develop an interest in the country’s culture and people when working as a fund manager in Hong Kong. And in the early 1990s I decided to study Vietnamese in Hanoi. This led to a two- year language course and the decision to follow my career path in Vietnam. The country offers extraordinary human capital with more than 90 million citizens, many of them highly educated. Also, the working age population should grow a very impressive 15% over the next two decades. This compares to China, whose working population is forecast to decline 2% over the same period.
Give us some idea of the macro- economic fundamentals in Vietnam – how strong are they?
The economy has achieved strong economic growth rates in the past 10 years, albeit slightly less high in the last few years, as the country recovers from a period of overheating. The government is committed to making further structural changes to the economy, and, there is a commitment to embrace fiscal and monetary discipline to ensure some of the problems like high inflation and interest rates, as well as currency instability, are brought under control. Prospects are excellent – Vietnam is ranked fourth in the world in terms of forecast GDP growth rates over the next 40 years, according to a study by Citi Group. And in terms of raw economic potential, it is hard to do a whole lot better than Vietnam.
The main stock market index – the VNI – has stabilised since falling off a cliff in 2008. Can you give us some idea of what is going on and what are the prospects for the local market?
Yes, you are right – the market took a dive as the government applied the brakes to an overheating economy. The situation wasn’t helped by the global meltdown in late 2008. And it’s also right to say that the VNI has underperformed compared with many of its competitors in the region, but prospects are good. The market offers value and yield. Three quarters of listed companies trade below book value; while PE ratios are not much above 6, and many companies yield over 10%.
Can you tell us how you’re working with family offices?
Family offices have been big investors in all the funds. They buy into the long-term investment opportunities of Vietnam, seeing it as a frontier market where returns can be both high in the short term, and also steady over a longer-term perspective. We also offer co-investment opportunities for family offices that want a more hands- on approach to investing in Vietnam. The country offers a nice opportunity for family offices, particularly one that is not necessarily as correlated to some of the bigger emerging markets.
Can you give us an idea of some of the co-investment opportunities that might interest family offices?
Masan Group, a burgeoning conglomerate with interests in food, finance and mining business. It is one of the largest private sector companies in Vietnam and has grown rapidly in the last few years. Recently, it purchased the Nui Phao tungsten mine in northern Vietnam, which is forecast to become the world’s biggest producer of this highly strategic metal.
Vinamilk is also another one we like. It is the biggest dairy company in Vietnam, as well as one of the biggest companies in the country. It has grown rapidly, and in 2010 was the first company in Vietnam to be included in the Forbes Asia’s 200 top- performing small and mid-sized companies.
Some of the others we like are: REE Corporation, a property-focused investment group; Hoang Anh Gia Lai, a diversified holding company with interests spanning property to hydro electric power generation; and FPT, the country’s foremost technology company.
Are you looking at opportunities beyond Vietnam?
Yes, we are investing in Laos and Cambodia, and see great potential in the Greater Mekong Sub-region. In fact I believe we are the only institution that invests in all three Lao, Cambodian and Vietnamese stock markets. A small boast, but a sign of commitment across the Mekong region. We deploy our own capital into financial institutions such as micro-finance in Cambodia, and soon expect to be invested in Myanmar, giving us the depth to support broader investment mandates such as our Clean Tech fund which covers the Mekong and Brahmaputra regions.
For more information please contact:
Dragon Capital Group Limited
1901 Me Linh Point, 2 Ngo Duc Ke,
District 1, Ho Chi Minh City, Vietnam
T: +84 8 3823 9355
F: +84 8 3823 9366