The best funds to buy as Vietnam evolves

Vietnam is one of the world's fastest-growing markets, and this trend is expected to continue over the next decade. The economy is benefiting from growth in all three key components of GDP: rising exports as global firms diversify their supply chains from China; a major investment drive backed by both the government and the private sector; and the growth of consumer spending as the middle class expands.

At present, Vietnam is still classed as a frontier market rather than an emerging market. This distinction is about market infrastructure and access rules rather than the opportunities available – it is actually a larger and broader market than some countries that are already classed as emerging markets – but it limits how much exposure many foreign investors will have. However, FTSE Russell plans to reclassify Vietnam into the FTSE Emerging Market index in September 2026. This should mean that a range of new investors – both tracker funds and active funds benchmarked against it – will begin to put money into the market.

There are three UK-listed investment trusts that specialise in Vietnam. The largest is the £1.2 billion Vietnam Enterprise Investments (LSE: VEIL), followed by the £700 million VinaCapital Vietnam Opportunity Fund (LSE: VOF), and the £75 million Vietnam Holding (LSE: VNH). All of these trusts share a number of top holdings, which reflects the reality that emerging markets often have a limited number of large, higher-quality companies.

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Vietnam's banks act as “amplified growth proxies”

All three have a lot in financials – for example, VEIL has around half. “Vietnam's economy is overwhelmingly bank-funded,” says Thao Ngo, who manages VEIL with Tuan Le. Bank credit accounts for around 145% of GDP due to underdeveloped bond and equity markets and credit growth runs at roughly two to 2.5 times the nominal GDP growth rate. “This leverage to GDP makes banks not just a proxy for growth, but an amplified proxy.” The sector enjoys a return on equity of 17%-18% compared with a regional average of 9%-11%.

VNH's portfolio is more concentrated than that of VEIL. It tilts more to mid-cap stocks than its peers, although at the end of 2025, it had around 75% in larger stocks “reflecting adaptation to market realities while maintaining conviction in Vietnam's structural story”, say the managers in the latest interim report. Their strategy focuses on high-growth companies geared to domestic consumption, industrialisation and urbanisation. The largest holding (at 10%) is Mobile World Investment Corp, which is also a major holding for VEIL and VOF. This grocery-to-electronics retailer and mobile-phone group plans to expand in Southeast Asia as well as growing further in Vietnam.

VOF looks for an extra edge in private markets. It has seven private holdings alongside 21 public investments (many of the latter were made before the firms listed). This builds exposure to sectors that are under-represented on public markets, such as consumer themes, technology and renewable energy. These are “developing quickly, but are still at a nascent stage to achieve maturity for listing”, says the fund, which is managed by Khanh Vu. For example, healthcare is an important area that is under-represented in public markets: the entire sector – comprised of one general hospital, a handful of generic drug manufacturers, and pharmacies – accounts for around 1% of the index. VOF has so far invested in three hospital platforms and successfully exited two.

At present, the three are trading on discounts to net asset value (NAV) of 15%, 7% and 23% respectively, which is broadly in line with their five-year averages. The Vietnamese market has been affected by the Middle East crisis, but the impact will hopefully be “cyclical and temporary rather than structural and permanent”, as VNH puts it. The long-term story remains the shift from low-cost exports to a higher-value economy with a growing middle class.

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