CHAPTER 3

Securities investment fund

 LEARNING OBJECTIVES
• Understand the role of securities investment funds
• Distinguish types of securities investment funds
• Understand the current status of securities investment funds in
Vietnam
 CONTENT
1. Definition and role of investment fund

2. Classification of investment fund

3. Entities related to organizing and operations of investment fund

4. Operations of investment fund

5. Evaluation of investment fund operations

3
 1. Definition and role of investment fund
 1.1. Definition of investment fund
 1.2. Role of investment fund
 1.1. Definition of investment fund
 A fund formed from investors’ capital contributions with the
purpose of earning profits from investing in securities or other
types of investment assets (including real estate), in which
investors do not have daily control over the fund's investment
decisions.
 1.2. Role of investment fund
For the economy and stock market:
 Investment funds contribute to raising capital for the development of the
economy in general and the development of the primary market in
particular.
 Investment funds contribute to stabilizing the secondary market.
 Investment funds contribute to universalizing securities investment and
promoting internal resources.
 Investment funds operations enhance the ability to mobilize foreign capital.
For businesses:
 Strengthen effective governance
 Improve access to long-term capital
 1.2. Role of investment fund
For investors:
1. Diversify portfolio, minimize risks
2. Professional investment management
3. Low operating costs
4. Easy withdrawal of investment capital and sometimes be able to
take privileged participation
5. Wider selection

For fund management companies: Earn commissions and bonuses

2. Classification of investment fund
 3. Entities related to organizing and
operations of investment fund
elected by the
Investor General
Meeting to
supervise the
activities of
investment fund,
fund management
company,
supervisory bank
is a commercial bank
with a certificate of
registration of securities
implement investment depository operations,
fund management to selected by fund
ensure compliance management company to
with the fund's charter perform depository
& increase fund's services and supervise
assets fund management
 4. Operations of investment fund
Capital raising:
 Determine initial selling price of fund certificate: corporate fund (determined
by underwriting organization) and trust fund (determined by fund management
company)
 Select offering method: directly or through an underwriting organization
Investment operations: (objectives)
 Income: Quickly obtain a source of dividend payments
 Capital interest: Increases the value of initial capital through the evaluation of
stocks in the fund's investment portfolio
 Income and capital interest: The combination of the above two factors
 4. Operations of investment fund
• Providing information to investors
• Certificate pricing, issuance, and buyback

• NAV = [Total assets and investments - Total liabilities]/Number

of units outstanding

• NAV is usually calculated at the close of Stock Exchange.

 Pricing method of buying/selling price of
open-ended fund certificate
 Buying fund certificates (investment funds’ offering price):
1. No-load fund: Buying price = NAV
2. Load fund: Buying price = NAV + Selling fee
 Selling fee: is determined by a percentage based on the holding term, or
investment objective, or investment value defined in the prospectus
 In Vietnam, selling fee does not exceed 5% of the transaction value;
buyback fee, conversion fee does not exceed 3% of transaction value
 Selling fund certificates (investment funds’ buyback price):
 Buyback price = NAV – NAV* buyback fee rate
 5. Evaluation of investment fund operations
 5.1. Operating expenses of investment fund
 5.2. Income of investment fund
 5.3. Evaluation of investment fund operations
 5.1. Operating expenses of investment fund
 Expenses related to initial public offering of fund certificates
(printing, marketing, paying to agents): 4-6%
 Expenses related to:
• Investment consulting fees
• Storage and preservation fees of fund assets
• Interest rate, tax (if any)
• Fees paid to institutions valuing fund's investments
• Management fees
 5.2. Income of investment fund
Income of investment fund
Income is money received from interest rate, dividends, bond
interest, capital gain/loss realized with the sale of securities, value
gained from issuing fund certificates, deposit interest and other
sources.
Income distribution
Business performance evaluating indicators
5.2. Income of investment fund
5.3. Evaluation of investment fund operations
 SUMMARY
• Definition and role of investment fund
• Classification of securities investment fund
• Entities related to organizing and operations of investment fund
• Operations of investment fund
• Evaluation of investment fund operations