Vanguard plans $2.5bn investment in Vietnam after FTSE upgrade

Vietnam's stock market is set to move from frontier-market status to secondary emerging-market status under FTSE Russell, with the upgrade taking effect on September 21 after years of reforms.

The reclassification is expected to deepen the market's access to global capital and strengthen links between Vietnamese businesses and international investors.

Speaking at a ceremony in Hanoi on Thursday evening marking Vietnam's official inclusion in the FTSE Russell index series, Duncan Burns, Vanguard's head of investment management and global equities for Asia-Pacific, said the planned investment would be made on behalf of millions of investors worldwide.

Many of those investors may never have visited Vietnam, Burns said, but through globally diversified investment portfolios, they can participate in the country's growth.

Vanguard buys 'whole haystack'

Burns said Vanguard's investment in Vietnam reflects the investment philosophy the company has followed since its founding in 1975.

The company's founder, Jack Bogle, believed investing had become too expensive and complicated.

He pioneered index funds for ordinary investors, which buy stocks according to an index rather than trying to pick those that will outperform the market.

Vanguard now manages around $13 trillion in assets for more than 60 million investors.

Every dollar in those assets belongs to someone saving for an important goal, such as buying a home, paying for education, retiring or supporting their family, Burns said.

For those investors, Vanguard focuses on keeping costs low and maintaining broad diversification, starting with portfolios that cover global markets.

He said the approach is based on modern portfolio theory, with the simple premise that broader diversification is preferable to concentrating investments.

Instead of trying to predict which country, industry or company will outperform, index funds allow investors to reduce their dependence on any single market.

"Don't look for the needle in the haystack. Just buy the haystack," Burns quoted Bogle as saying.

"Today, Vanguard is very pleased to see Vietnam officially become part of our haystack."

Vanguard takes long-term view on Vietnam

Vietnam has entered Vanguard's 'haystack' as the asset manager oversees a significant share of assets in index funds tracking FTSE's global emerging-market indexes.

That gives Vanguard a detailed understanding of how the indexes operate, Burns said, adding that the company has confidence in FTSE's transparent methodology.

He said Vietnam deserved the upgrade following years of reforms and development, including improvements in market accessibility, transparency, and infrastructure.

"That matters because we're not short-term traders," Burns said.

Vanguard's index funds and exchange-traded funds are designed for the long term, and the company expects to hold Vietnamese stocks for decades as long as Vietnam remains in the index, he said.

After spending a week in Vietnam, Burns said what impressed him most was the Vietnamese focus on opportunities ahead.

"That's why being included in the index today is not the finish line. It's more like the beginning of something bigger," he said.

According to Burns, history shows that inclusion in major indexes can raise a market's profile, attract more investors, improve access to capital, and deepen integration into the global financial system.

He also said the upgrade was not the result of a single decision or action, but the outcome of years of work and coordination among agencies sharing a common goal.