Why haven’t life insurers set up fund management companies?

January 20, 2010

LookAtVietnam – Life insurance companies are moving ahead with plans to set up fund management companies, but they say are delaying for the time being.

“Every life insurance company wants to set up investment fund management companies of their own, because this is a model popular all over the world. However, we don’t think that we should set up such a company right now,” said the general director of a life insurance company.


“We have prepared well for the establishment of such a company. However, the most important factor is choosing a suitable time,” he added.


The general director went on to say that the Vietnam’s finance market is really fledgling and investors mainly make investments by ‘following the crowd’.


When asked what time he thinks the most suitable moment for setting up fund a management company, he said that the opportunity may come in one or two years.


Prudential and Manulife have their own fund management companies already; however, other life insurance companies cannot follow the mode. They may consider setting up the companies after 2011. Under Vietnam’s WTO commitments, five years after Vietnam joined WTO, it will allow the establishment of 100 percent foreign owned fund management companies.


“A question has been raised about whether to apply for setting up fund management companies right now. If yes, only joint venture companies are allowed to be established now. And what will happen in 2011, when the WTO commitments take effect? Will the joint ventures get dissolved?” the said director questioned.


“I am sure that this is the problem for other life insurance companies to think about too when they choose the time for establishing their own companies,” he added.


Other life insurers, when asked why they have not set up fund management companies yet, cited the reasons relating to the lack of the legal framework. For example, Vietnam still does not have the regulations on the establishment and operation of open funds. However, they admitted that the biggest reason for them to delay the establishment is that their opportunities have not come up.


An official from the Ministry of Finance also said: “I strongly believe that life insurers in Vietnam have more the financial capability and strength to set up fund management companies. The only thing that explains the tardiness in the companies’ establishment is just the unripe opportunity”.


However, planning to set up companies in one or two years does not mean that insurers are setting idle now. All of them are gearing up to prepare for fund management companies to be set up in the near future.



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