The government announced as part of the economic recovery plan the establishment of the Romanian Investment Fund (FRI), with an initial capitalisation of 300 million euros, to finance investments in areas of strategic interest.

By Claudiu Vrinceanu

The model proposed by the government is the transformation of the Romanian Counter-Guarantee Fund (FRC) into the new Romanian Investment Fund. The Romanian Counter-Guarantee Fund (FRC) was established in 2009 in order to support access to finance for SMEs, being a specialised financial institution, with a capital of 400 million lei. FRC is organised as a company managed in a dualistic system and whose shareholders are the Romanian state, through the Ministry of Public Finance (68%), and the Post-Privatization Foundation (32%).

According to the government, the transformation of the Counter-Guarantee Fund into the Romanian Investment Fund is a better option, because it is already a capitalised fund, compared to the establishment of another fund.

The Association of Private Investments and Venture Capital of South-Eastern Europe (SEEPEA) welcomes the decision of the Romanian Government to set up the Romanian Investment Fund as a sovereign wealth and development fund.

“We hope that it will become an important catalyst for the development of the private equity industry (closed-end investment funds with acquisition, growth or mezzanine strategies) and venture capital in Romania. It is another extremely important step in continuing what has been done by adopting the legislation on alternative investment funds, which will allow infusions of Romanian capital in the real economy, essential capital in this difficult socio-economic context worldwide,” say SEEPEA representatives.

The investment funds that will be able to be set up through these co-participations will constitute that class of long-term investors in the Romanian economy that will ensure the investment flows and development strategies necessary for the economic emancipation of the country and the increase of competitiveness.

According to the government’s plan, the investment fund will be used to finance activities such as private equity (investment funds in the form of participation in the share capital of companies), venture capital (investment funds in new or newly established companies), investment promotion agency, educational projects for entrepreneurs.

Therefore, the investment fund will need four teams with four different specialisations (private equity, venture capital, investment and education). Each of these four domains attracts people with different skills and talents. Apart from the fact that four such different teams will lead to extremely high management costs, the expected politicization of the management of the investment fund is likely to generate low quality investments that will bring losses to investors, ie Romanian citizens.