Only 23 fund management companies are still in operation out of the 47 companies licensed by the State Securities Commission (SSC).
The total assets managed by the management companies have dropped by 23 percent in comparison with the end of 2011. A lot of companies have been just trying to hold out to survive the current difficulties.
It’s difficult to raise funds
The most noteworthy event in the fund management market so far this year is the listing of ASIAGF certificates of the ACB Growth Fund. However, the initial capital of the fund was modest at just 240 billion dong. The total assets of ASIAGF had increased to 275 billion dong by the end of the second quarter of 2012.
With the management fee of 0.5 percent of the total net assets every year, ACB Fund Management Company could earn the revenue of 1.4 billion dong, a modest income if compared with the expenses to operate the business.
Meanwhile, other management companies still cannot raise funds. Many of them have been living on the asset management, or making investment in the market as a normal investor with their own capital.
Of the domestic fund management companies, Vinafund (VFM) has set up four funds, including the listed public funds VFMVF1, VFMV4, VFMVFA and one member fund VFMVF2. The total chartered capital of the four funds is over 3 trillion dong.
Though Vinafund is managing the highest number of funds among domestic companies, the management fees collected by the company in 2011 was still modest. In principle, Vinafund charged two percent on the total assets of VF1, VF4, VFA and one percent of VF2. However, with the sharp stock price falls, the company accepted to lower the management fee to 1.5 percent for VF4, while promising not to collect fee from VF2 if the net asset value of the fund certificates falls to below the face value.
In 2011, Vinafund collected 56,588 billion dong in management fee, while the investment portfolio management fee was 168 million dong. The company’s post tax profit was 7.864 billion dong on the chartered capital of 230 billion dong.
Meanwhile, other fund management companies have been living in poorer conditions because they have fewer funds. They have been trying to hold out to retain the operation licenses, or acting as the investment portfolio manager, authorised investors.
Most of the fund management companies which can live well in the current circumstances are the ones belonging to powerful financial institutions which make big investments, such as banks, finance companies or real estate conglomerates.
With 98 trillion dong being managed by fund management companies, it is estimated that management companies can collect the total fee of 294 billion dong a year, if considering the average management feed is 0.3 percent of the net asset value.
The figure is equal to 11 percent of the chartered capital of 2600 billion dong of the companies. And if deducting the expenses, the actual income proves to make nothing if compared with the sums of money the owners of the companies have spent.
A director of a fund management company said it is estimated that about 20 fund management companies are in very difficult conditions.
In the past, the companies still could earn money from the “strong waves” in the market. However, the stock market falls now do not allow them to make money so easily.
Though it is now a difficult period for fund management companies, the licenses of the companies remain relatively expensive. In 2010-2011, a license was valued at 20 billion dong.