Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry

The Ministry of Finance is proposing a key reform that would allow commercial banks to invest in and distribute mutual fund certificates, as part of a broader plan to restructure the investor base and foster the development of Vietnam’s fund management industry.

The proposal is detailed in the recently released “Scheme on Restructuring Investors and Developing the Securities Investment Fund Industry,” which lays out a roadmap to diversify distribution channels and improve retail investor access to investment funds.

Vietnam’s fund management sector has grown significantly in recent years alongside the stock market. Currently, the country is home to 43 fund management companies overseeing 123 securities investment funds, with total assets under management (AUM) exceeding VND750 trillion ($28.43 billion), more than seven times the level in 2014.

Despite this growth, the sector still has a modest size. By the end of 2024, AUM accounted for just 7% of GDP, and nearly 90% of those assets are derived from entrusted investments, mainly from insurance companies, and allocated to bonds and bank deposits.

In comparison, China, which began developing its fund industry about a decade earlier than Vietnam, has reached an AUM-to-GDP ratio of 21%. India, despite having lower GDP per capita than Vietnam, has achieved nearly 18%. The U.S. stands out with an AUM equivalent to 133% of GDP.

According to experts, mutual funds remain out of reach for most individual investors in Vietnam due to poor public awareness and limited, outdated distribution channels. According to a representative from InvestingPro, digital distribution is still in its infancy, and most fund sales rely on traditional methods.

“Retail investors, especially the younger generation, are looking for investment options that are convenient, transparent, and digitally accessible,” he noted.

To address these issues, the scheme has outlined a set of measures to diversify fund certificate distribution channels. The State Securities Commission (SSC) will work with relevant units to revise Circular No. 98 to facilitate the application of information technology in fund certificate distribution, with a completion target set for 2025.

Vietnam Securities Depository and Clearing Corporation (VSDC) will collaborate with the SSC and market participants to develop a centralized public fund information system by 2028.

VSDC will also upgrade the transfer agent system to support various fund structures and improve transaction speed, with development planned through 2027.

Importantly, the Ministry of Finance is proposing amendments to the State Bank of Vietnam’s Circular No. 16 (dated on November 10, 2021), aiming to encourage commercial banks to both invest in and distribute mutual fund certificates.

The development of mutual fund certificate distribution systems has attracted significant attention from representatives of fund management companies and fund distributors.

According to InvestingPro, it is essential to diversify distribution channels by strengthening collaboration with fintech companies and digital investment platforms to expand the distribution network, thereby making mutual fund products more accessible to investors.

Thieu Nhat Le, CEO of UOB Asset Management Vietnam, emphasized that mutual fund distribution requires both diversity and quality.

“In many countries, asset management has seen rapid advancement once banks were allowed to distribute fund products,” she said. “Thailand is a good example. Banks bring scale, infrastructure, and extensive customer data - advantages that have yet to be fully leveraged in Vietnam.”