VinaCap’s impact fund moves on first deal

The social impact fund managed by the Vietnam-based private equity firm has begun its first seed investment aimed at training for disadvantaged youth in Saigon.

VinaCapital, together with the NGO VinaCapital Foundation, has started work on the first seed investment from the Lotus Impact Fund, which was launched earlier this month.

The seed investment is in a Hospitality Training Centre and aims to provide training in the hospitality industry for street kids in Ho Chi Minh City. 

“We’ve already started due diligence and are working [with the Centre] on business plan development,” said Don Lam, VinaCapital’s founding partner. 

Business expansion plans include opening a centralised kitchen to develop a catering business, and VinaCapital is talking to brands such as Starbucks about taking on their catering services, Lam said. 

The Lotus fund is focused on impact investing in Vietnam, Laos, Cambodia and Myanmar and will seek deals in the education, housing, health, water, agriculture and microfinance sectors.

The fund is targeting $40 million – $50 million and the firm is currently in talks with anchor investors in the US, Lam said.

The Lotus fund is probably the first social impact vehicle focused on the frontier markets of Southeast Asia.

He added that social impact funds, unlike classic private equity, do not require an anchor investor for momentum. “If an institution or family office likes the fund, they invest. It’s not a precondition to have an anchor investor.”

Carry and fees will be recycled back into the foundation, added Katherine Yip, member of the board of the foundation and co-founder of VinaCapital. She believes the fund is the first social impact vehicle focused on the frontier markets of Southeast Asia. 

The fund is co-managed by the VinaCapital Foundation and VinaCapital. Each entity will provide two professionals for the investment team and there will be additional support from VinaCapital’s entire private equity team.

Lam sees an advantage in using VinCapital’s experience and resources to drive social impact “at scale and at a fraction of the overhead cost of the best performing NGO worldwide”.

The firm’s track record from 2008 – 2013 included 11 exits valued at about $300 million and representing a gross IRR of 32.5 percent, according to VinaCapital.

Two other seed investments from the Lotus fund are in the planning stage: in Myanmar, microcredit loans to business students recruited from rural areas, and in Cambodia, an investment in a clean water service provider.