Vietnam funds lag benchmark despite VN-Index hitting record highs

Vietnam’s benchmark VN-Index has surged to successive record highs in recent weeks, but many of the country’s largest investment funds have significantly underperformed the market, with some still posting negative returns for the year.

The VN-Index has rebounded strongly since late March, climbing from around 1,592 points to above 1,930 points, surpassing previous peaks reached in January and February before geopolitical tensions in the Middle East escalated.

The benchmark, which tracks the performance of the Ho Chi Minh Stock Exchange, rose about 10.7% in April alone and was up roughly 7.3% year-to-date.

Despite the rally, data compiled by The Investor showed that the performance of many investment funds has failed to keep pace with the index.

Dragon Capital’s Dynamic Securities Investment Fund (DCDS), which manages nearly VND6 trillion ($227.66 million) in assets, posted a negative return of 1.51% as of May 14. The fund had fallen as much as 4.2% by the end of April.

Another Dragon Capital fund, the DC Dividend Focus Equity Fund (DCDE), also posted a negative return of 2.22% year-to-date as of May 14, and was down 4.3% by the end of April.

Performance charts showed both DCDS and DCDE closely tracked the VN-Index earlier this year before diverging sharply from late March onward. While the benchmark rallied strongly, the net asset values (NAV) of both funds remained largely flat.

Meanwhile, VinaCapital-managed funds including VOEF, VMEEF and VESAF saw NAV per fund certificate decline by between 1% and 3.1% in April despite the market surge. By mid-May, the three funds had posted gains of 2.3%, 5.8% and 3%, respectively, from the start of the year - still well below the VN-Index’s performance.

Several funds managed by VCBF and SSI Asset Management (SSIAM) also underperformed the benchmark, with some remaining in negative territory for the year.

A narrow rally

Fund managers attributed the underperformance largely to increasingly concentrated market flows, with gains driven primarily by a small group of heavyweight stocks.

Data showed that around 95% of the VN-Index’s gains in April came from companies linked to Vingroup’s ecosystem. Excluding those stocks, the benchmark would have risen only about 0.5% during the month.

From the start of April to May 15, the VN-Index gained nearly 330 points, of which Vingroup affiliates VIC and VHM alone contributed roughly 215 points.

The uneven rally left many funds trailing because they lacked sufficient exposure to the index’s biggest gainers.

In a recent report, VinaCapital’s Dynamic Dividend Equity Fund (VDEF) said its weaker performance in April was mainly due to the absence of Vingroup-related stocks in its portfolio.

The fund said its actively managed strategy focuses on value investing and sustainable earnings growth. Holdings including Mobile World Investment (MWG), Hoa Phat Group (HPG), VietinBank (CTG), and Military Bank (MBB) all posted positive business results and met the fund’s earnings growth expectations for 2026.

VESAF said current market movements were increasingly speculative and detached from corporate fundamentals. The fund said it would continue avoiding short-term speculative rallies and instead focus on accumulating fundamentally strong stocks with reasonable valuations.

DCDS said its weaker performance stemmed from maintaining lower-than-market weightings in VIC and VHM, the two stocks that have led the benchmark’s rally. However, the fund said it raised exposure to the two stocks to around 17% of NAV during April.

The recent market trend highlights the VN-Index’s growing dependence on a handful of large-cap stocks rather than reflecting the broader health of the market.

In a market where a few companies can drive most of the benchmark’s movement, measuring investment performance solely against the VN-Index may become increasingly misleading.

When most gains are concentrated in a small group of large-cap stocks, returns achieved by funds and retail investors may diverge significantly from the benchmark. Analysts said this also raised questions about the market’s underlying strength, as a sustainable rally would typically require broader participation across sectors and stocks.

Still, many funds remain optimistic about the longer-term outlook, citing attractive market valuations when excluding large-cap stocks. According to some estimates, the market’s projected 2026 price-to-earnings (P/E) ratio is currently slightly above 10 times, close to the lowest level seen in nearly a decade.

Positive first-quarter earnings from many companies, easing concerns over geopolitical tensions, interest rates and exchange rates, along with expectations that FTSE Russell could upgrade Vietnam to secondary emerging market status in September and the possibility of MSCI placing the market on its watch list, continue to support the market’s medium- and long-term outlook.