According to the UN, the world’s projected population will be 9.6 billion people in 2050, compared to 2.4 billion at the end of the Second World War and seven billion today. From a global perspective, demand for food is tremendous, while drought, storm, disease, and climate change threaten food security. Supply of food is constrained as population growth is projected to outpace arable land and available agriculture technologies.
From Vietnam’s perspective, the rise of middle-income class and health awareness created a shift in domestic consumption from quantity to quality food products. However the lacks of infrastructure, scalability, and know-how led to the constraint in providing quality food products.
An opportune fund
Vietnam has become a leading agricultural, rice and cashew exporter and coffee manufacturer (see Fig. 1). The country has strong competitive advantages in agricultural food production, yet its products have often been undervalued on the international markets with no brand recognition. For a long time, Vietnam focused on volume and total export value rather than on quality, added value or branding of its agricultural products. This lead the country to position itself in the global market as an exporter of raw materials and of lower quality and lower priced products.
Seeing a great opportunity to change the game, SSI Asset Management (SSIAM) is in the process of setting up a Vietnam food chain fund to help solve these issues and to improve food quality. While the fund’s objective is to achieve above market return on investment for the fund’s investors, it also aims at generating economic and social benefits for local communities, positively impacting their standard of living.
The fund takes a value chain integration approach when investing in food related sectors, selectively from upstream to downstream, creating value and unlocking growth potential through economy of scales. SSIAM sees huge market size and ample opportunities and believes value chain integration will help to improve sector’s cost efficiency and control input’s price as well as output’s quality.
SSIAM and its parent company, Saigon Securities Inc (SSI), the largest and leading securities firm by market capitalisation in Vietnam, has many years of experience of investing in the agriculture sector. It employs an active post-investment management strategy in investee companies where team members join the companies’ Board of Director and Supervisory Committee and work with key members of management to map out a three to five year business strategy, improve corporate governance, reduce operational costs, and connect with strategic investors. This strategy has broadened the investment team with extensive industry knowledge.
Creating firm roots
So far, two anchor investors have committed to invest 10 percent to the fund. The team is still trying to raise more capital from investors who share the same vision of creating a better world for future generations, where food security and food safety is secured. What differentiates SSIAM to other asset management firms from a fund raising perspective is that in the past, it has built a reputation as one of the most effective investment managers. Not only has it generated higher returns to investors, it has also helped enhance the values of investee companies.
It manages a concentrated portfolio and treats each investment as a partnership. A hands-on active investment strategy has helped the company surpass overall market performance.
Today the team are working on a merger deal between one of the firm’s investees in the agriculture sector and its main competitor. It will soon join hands to create a much larger player in the market and help realise the vision of making a difference for the future of Vietnam’s agriculture.
