In Vietnam, private equity players are finding an opportunity as the reforms – read privatisation – takes off, and at our upcoming Asia PE-VC Summit you will hear more from Vina Capital’s managing director and chief investment officer, Andy Ho, on how further liberalisation will be vital to sustaining strong deal activity.
At VinaCapital, Ho oversees capital markets, private equity, fixed income and venture capital investment teams. He previously held senior positions at Prudential Vietnam’s investment unit, Dell Ventures and Ernst & Young, and has led private placement deals totalling $700 million in the country.
With dealflow weakening in most Asean nations in the last 20 months, many private equity funds have headed to Vietnam, where prospects of growth are better in the short term. Investors participated in deals worth about $300 million last year, a figure that is expected to rise to between $500 million and $1 billion annually in coming years. Yet, investors have struggled to find deal sizes that they normally participate in. The market is still too small to compensate for weaker business in other Southeast Asian markets.
Domestic firms such as VinaCapital, Mekong Capital, Dragon Capital and Vietnam Investments Group dominated the PE market, and accounted for about 75 per cent of funds inflow.
“I started investing in private equity in 2004 with Prudential. Before that I was doing venture capital investment at Dell Computer. My CPA background, having worked at EY before, is very much relevant to the financial and investment industry,” Ho said in a chat with DEALSTREETASIA.
A graduate of MIT, Ho chose a career in investing because it offered a quick path to learning a lot more about different sectors, different technologies and different ways of running businesses. After working in the US for several years, Ho decided to come back to Vietnam, which had started growing at a fast clip in 2007.
“I wanted to come back and contribute to the incredible pace of growth and development that is happening here. I joined VinaCapital in 2007 to lead the investment team across multiple asset classes and sectors. We fundamentally look look at companies and sectors that are helping the economy grow,” Ho said. “My past experience allowed me to step into the role at VinaCapital with a strong focus on risks, while delivering strong returns to investors.”
While making investments decisions, Ho relies on the trust factor. “The key element that I focus my time on is to understand the company’s management, making sure I can trust the management team, and deciding whether they can build a successful business and execute a realistic business plan.”
Another focus is industries that stand to benefit as a consequence of Vietnam’s growth rate of 6-7 per cent. “As people are getting wealthier, we are looking at sectors and companies that can benefit from this wealth effect. For example, as people become wealthier, they may buy an apartment, furniture and interiors, a motorbike or a car; or they may send their children to better education and private schools, or and spend money on food and beverages. When wealth creation is apparent in an economy like Vietnam, it creates many opportunities for us to invest,” Ho said.
Competition among PE players is set to intensify. International and local players are looking to increase their exposure to Vietnam, particularly in sector such as retail, food and beverage, and healthcare. Making a profit on investments would depend on the terms of the investment agreement.
“I’ve seen many cases that in the end, how investors make good money is more relevant to the terms that they negotiated to enter the investment than simply the performance of the business. For us, the terms we enter and exit our investments is really important, particularly as we find ourselves holding minority positions in private deals. There may be situations where the performance of the business is not very strong but because the terms that you negotiated are strong, they allow you to exit and still deliver a profit. There are also circumstances where the company does very well but your terms are weak and you don’t make profit,” Ho said.
At the Asia Private Equity-Venture Capital Summit, Ho will highlight private investment opportunities in Vietnam. “Private equity can be a better way to invest in Vietnam, simply because they allow investors to enjoy fewer risks and similar or better returns than public equity. If you have the patience, you can deliver between 20-25 per cent IRR over a relatively short holding period. At VinaCapital, we have been able to deliver that consistently over the decade we have been invested in Vietnam,” he added.