Local investment fund Fondul Proprietatea’s shareholders will decide at the end of October if American group Franklin Templeton will continue as the fund’s manager until April 2018. They will also decide if they give the manager discretionary powers in selling some of the fund's largest assets.

Franklin Templeton, which was appointed Fondul Proprietatea’s manager in September 2010, when the Romanian state controlled the fund, convinced the fund’s new shareholders, mostly foreign and local institutional investors, to extend its mandate for another two years, starting September 30, 2014.

Its current two-year mandate should expire on September 30, 2016, but due to the implementation of EU directive on alternative investment fund management, Franklin Templeton wants to transfer the management contract to an affiliated entity based in Luxembourg, starting April 1, 2016. Franklin Templeton has also asked the fund’s shareholders to grant a 2-year mandate to the new entity, so until April 1, 2018.

Fondul Proprietatea’s shareholders will also analyze in October how Franklin Templeton fulfilled its obligations as manager. According to the current management contract, which started at end-September 2014, the manager was supposed to work on reducing the discount at which the fund’s shares were trading compared to its net asset value (NAV) per share to under 15%, which hasn’t happened. The discount is currently about 30%.

Franklin Templeton had some margin on this, based on the market conditions or the policies of the regulatory authorities. For example, the manager’s efforts to list Fondul Proprietatea on the London Stock Exchange were delayed by Romania’s Financial Supervisory Authority (ASF), and only concluded in April 2015. The state’s refusal to list its companies, in which the fund is a minority shareholder, also affected the fund’s shares.

Franklin Templeton has also asked the shareholders to give it discretionary decision powers to sell large chunks of Fondul Proprietatea’s assets in the next two years. This too will be discussed in the shareholders’ meeting on October 29.

editor@romania-insider.com