THE PROPRIETATEA FUND - One year after its listing

From the very first year of trading on the stock exchange, The Proprietatea Fund became the star of the Romanian stock market. The numbers prove it: the Proprietatea Fund accounted for half of the turnover of the Bucharest Stock Exchange in 2011.

Exactly one year ago, the shares of the Proprietatea Fund debuted on the Bucharest Stock Exchange, debuted on the Bucharest Stock Exchange at a price of 0.602 lei/share. After years of waiting, the hopes were high, for former asset owners, brokers, investors, authorities, market officials and for the manager of the Fund alike. But one year later, not everyone can say they are happy.

Meanwhile, the Fund's stock has fallen an additional 25%, and is now trading around 0.45 lei/share.

With total assets of 14.5 billion lei and stakes in companies considered strategic - Petrom, Transelectrica, Hidroelectrica-, the Fund attracted the attention of foreign investors. The latter seized the opportunity provided by the freefall of the stock, (-35% in 2011) and, at the end of 2011, had come to own 43.3% of the Proprietatea Fund (ed. note: foreign institutional investors).

For instance, American hedge fund Elliot Associates has indirectly come to control 12.5% of the share capital of the Proprietatea Fund.

However, the analysts are saying that the Fund could be even more attractive, if the companies in its portfolio were listed.

Besides, the Romanian government has made the commitment by law to begin the process for taking the companies in the Fund's portfolio public by the end of the year, although that is not something that can be relied on, given how long the Romanian state dragged its feet before getting the Proprietatea Fund listed on the Stock Exchange. The IPO of "Romgaz" this year, aside from the selling of additional stakes in "Transelectrica" and "Transgaz", would be satisfactory for investors.

On the other hand, the former asset owners who were abusively dispossessed, and for whom the Proprietatea Fund was created as a compensation mechanism in 2005, don't have too many reasons to be happy, as they received stock which they can't sell at its face value. On the other hand, they are a bit better off than the several thousand who are still on the waiting list and who have no idea how they are going to be compensated, since the government almost has no shares in the Proprietatea Fund left.

A solution to this problem would be the supplementation of the assets of the Proprietatea Fund, but the authorities have issued no signal in this respect. There has been no official announcement about any law concerning the restitution, even though the European Court of Human Rights has given Romania until July to deal with that problem.

The manager of the Fund, Franklin Templeton, doesn't seem to be concerned over the compensation process, saying that it is the authorities' problem to solve. Last year, Varujan Vosganian, former minister of the Economy and Finance, was saying that the authorities may drag their feet on compensating the former asset owners who were dispossessed by the communist regime since those amounts contribute to the deficit of the budget.