Property Fund continues with portfolio diversification

The Property Fund is looking to diversify its portfolio with new investments in the financial sector representing 2.7 percent of its net asset value, including BRD shares, an increase in the stake it holds in ALRO, gaining exposure in Austrian companies present in Central and Eastern Europe of 1.7 percent of the net asset value, and dropping stakes in small companies (both majority and minority stakes).

The fund is estimating that it will have dividends of RON 420 million out of its 2010 profits, up from the RON 179 million from its 2009 profits. It is currently evaluating the benefits of a secondary listing on another stock exchange, with potential destinations including London, Warsaw and Vienna.

“There’s not much we can buy [in Romania]. In order to have more to buy we need large companies,” said Mark Mobius, executive chairman of fund manager Franklin Templeton Emerging Markets.

At a presentation on the potential of emerging markets, Greg Konieczny, executive VP, Templeton Emerging Markets Group and fund manager of the Property Fund, said that a “number of policies have not been conducive to higher growth” and that a “change in the entire approach is needed to encourage investment.”

Last week’s general shareholders meeting of the Property Fund brought about changes to the structure of the fund’s body of nominees. Two candidates supported by the Finance Ministry have been elected to the current line-up: Doru Petre Dudas, general manager in the Finance Ministry, and Simion Dorin Rusu, an advisor to economy minister Ioan Ariton. The two are replacing Corin Trandafir, the representative of the Nicolae Malaxa heirs, and Monica Maurer, who had been representing the Finance Ministry. She was removed from the body of nominees at the proposal of the Finance Ministry. Other members of the body are Bogdan Dragoi, state secretary with the Finance Ministry, Cristian Busu, also supported by the Finance Ministry, and Sorin Mandrutescu, recommended by Wood & Co.

The Property Fund was set up by the Romanian government in December 2005 to compensate people whose assets were abusively expropriated by the communist regime, especially in cases where restitution in kind was not possible. Compensation was awarded by the granting of shares in the Property Fund, proportional to the loss. The Romanian government meets the value of compensation claims by reallocating shares from its holding to eligible claimants. It is intended that the Romanian government will over time become a minority shareholder in the fund.