Romania: Inefficient marketing has determined the slow pace of further privatisations and the exclusion of big investors

When Romania listed five investment funds in 1999 as part of a mass privatisation drive, millions of citizens received a little portion of what many hoped would one day grow to become a lucrative big pie.

Twenty years on, however, and the listed closed-end funds with combined net asset values of 7.65 billion lei ($1.8 billion) have failed to live up to market expectations due to inefficient management, the slow pace of further privatisations and the exclusion of big investors due to ownership limits that have left shares in the funds trading at steep discounts to their net asset values (NAV).

But now the government is mulling the creation of a 10 billion-euro sovereign wealth fund and Romania’s share market is on the cusp of being upgraded by international market index compilers such as FTSE Russell and MSCI from ‘frontier’ to ‘emerging market’, increasing the attractions of the listed funds.

“It can provide further support to the status of the Romanian equity market and may have a positive effect not only for the (closed-end funds) but all liquid Romanian equities,” said Alex Bebov, managing director of Balkan Advisory Company, a Sofia-based investment banker and bourse member.

But while foreign investors might be tempted by the steep discounts if the BSE market gets upgraded, investors and market participants warn that they would still face the same problems that have for years beset existing shareholders and which can only be solved if the fund companies are restructured.



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