Our Funds

Mekong Enterprise Fund

Vintage

2002

Status

Wound-up

Size

US$18.5 million

The first fund in Vietnam to focus uniquely on investing in private companies

Seeing the opportunity to set up the first fund in Vietnam to focus uniquely on investing in private companies, Mekong Capital launched the Mekong Enterprise Fund (MEF) in 2002 at US$18.5 million in committed capital.

MEF was fully invested in 10 companies by the end of 2005. We expected that our investments would be in private companies that would emerge as the leading private companies in Vietnam. Due to their fast growth, they would overtake SOEs to become the largest companies in Vietnam within ten years.

However, for the first five years, Mekong Capital made an ongoing series of mistakes and didn’t get many things right. MEF invested mainly in family-owned businesses managed by first-generation Vietnamese entrepreneurs, which proved very difficult to change or build up their management team.

Furthermore, MEF pursued smaller-sized companies with significant exposure to manufacturing and export-related industries. These industries were cyclical and proved difficult to capture much shareholder value given that they typically didn’t own anything of strategic value (like a brand, a distribution channel, intellectual property, and others).

Mekong Enterprise Fund Portfolio

We tried to add value by sharing our useful ideas

Moreover, we thought acquiring significant minority stakes will enable the Fund to cooperate closely with its investee companies. We tried to add value by sharing our useful ideas, providing solutions, and sometimes doing work for the investee companies. Hence, we applied value-addition programs to implement operational performance enhancement projects (such as six sigma or lean manufacturing systems), financial management, human resources recruiting, and corporate governance advisory.

We were going to Board meetings and giving them valuable suggestions. We even hired Six Sigma and Lean Manufacturing experts to show the companies how to improve their operations. However, no matter how great our ideas were, they just had little or no impact.

Compounding the problems, we tried hard but typically failed to add value to these companies. And, in the end, we also made many mistakes in the timing of exits.

Around 2005, we started to see some new opportunities

We noticed the investee companies who had domestic business in Vietnam tended to deliver more stable growth and higher margins from these domestic businesses. This made us curious to explore other domestic consumer-oriented companies in the subsequent funds.

MEF is no longer active. The Fund completed its winding-up procedures and ultimately returned approximately 100% of the value of its original capital to shareholders, which was far under our expectations.

However, the opportunities and lessons learned from it had led to our second fund, Mekong Enterprise Fund II, implementing lots of improvements and becoming one of the best performing funds in the history of Asian private equity.