After a team from the fund management firm Anpha Capital returned from an overseas fund raising trip, Viet Nam News spoke with Nikhil Singh, Chief Investment Officer, about their future fund and responsible investment.
Could you please tell me about the plan for your new fund?
We are launching our Viet Nam Responsible Investment Fund, a private equity fund that integrates environment, social and governance ("ESG") matters into the investment process. This approach expands the risk-return relationship since companies with good corporate governance trade at a 20 to 30 per cent premium with increased risk management of downside risks from social and environmental perspectives. Our target is to have a first close of the fund within the first half of 2010 and to then keep the fund open to new investors until a second close 18 months later.
In August of this year, Anpha Capital was the first Viet Nam fund management company to sign and adopt the United Nations Principles of Responsible Investment.
How about the response of potential investors?
The response of investors to both Viet Nam and our strategy is positive in general.
We are targeting western European institutional investors who are already familiar with responsible investment. We are focusing our efforts on investors in Scandinavia, the Netherlands and Switzerland. Additionally, London and Paris are emerging as capitals for sustainable and responsible investment. The institutions include development finance institutes, financial institutions, pension funds, foundations and family offices.
Due to the credit crisis in Europe and the US, it continues to be a challenging fundraising environment overall, however, responsible investment is one of the few bright spots in the market.
What is the strategy of the fund’s investment?
Our core strategy is to provide growth capital to Viet Nam’s middle market focusing on companies which operate in the domestic consumption sectors.
We then add a layer of ESG/Sustainability matters above and beyond pure investment matters with a dedicated sustainability team.
The asset class is private equity which we define as privately negotiated investments in equity and equity-linked instruments of both listed and unlisted companies.
The fund seeks to make significant minority investments and pursue operational and ESG improvements in its investee companies through board representation. Investment holding periods are expected to be three to five years.
We are targeting investments in the US$5m-$10m range and target company values will be under the $100 million range and would generally fall within the sectors including financial services, food and beverage, retail, healthcare, education and infrastructure enablers. Our investment criteria demands outstanding management, high returns on capital, attractive sector fundamentals, commitments to ESG improvements, entry valuation at discount to intrinsic value and clear exit options.
The responsible investment strategies include positive screening, which means searching for companies that are committed to responsible business practices; engagement: working with investee companies to promote ESG matters extended to shareholder voting matters; and integration: our specialist ESG team fully incorporates their analysis into our investment process.
Do you see any challenges in this new type of investment and how do you plan to deal with them?
The primary challenge is raising the awareness of the party we are in discussions with, either investor or investee. Some ‘get it’ relatively quickly and with some it is more time consuming.
Generally we find that most Vietnamese companies we meet are very open to learning about ESG matters. In the event that management or owners of companies that we are in discussions with are not committed to ESG matters, then we will no longer continue discussions.
How do you see the potential of the market?
We see the potential of Viet Nam as both a pure play, and as a focused sustainability investor to be enormous.
From our perspective the fundamentals of the Viet Nam market are outstanding. The per capita spending and under-penetration of products and services signal strong growth opportunities. If we also add in the large, young demographic distribution, fast urbanisation and stable political environment it is no surprise to see analysts consistently rank Viet Nam as the best beyond the BRICs (Brazil, Russia, India and China).
We do not see many other funds focused on the sustainability investment markets of this country.
A short introduction of Anpha Capital, and any further plans apart from this fund?
Anpha Capital, a Viet Nam licensed fund management company was formed in 2006. In 2007 we raised two funds, which listed on the Frankfurt Stock Exchange. Subsequently, a management spin-out of the funds was consummated. In 2009, Anpha Capital re-focused its operations on responsible investing. In this regard, Anpha Capital was the first Vietnamese fund management company to sign the United Nations Principles of Responsible Investment (UN PRI) and the first to integrate environmental, social and governance (ESG) matters into the investment process.