Romanian investment fund Fondul Proprietatea, one of the largest closed-end funds in the world, started trading on the London Stock Exchange (LSE) on Wednesday, April 29.

The fund’s manager, American group Franklin Templeton, expects the London listing to bring new investors in the fund and to draw more international attention to the Romanian stock market.

“The Fund has the potential to become one of the most visible and attractive closed-end funds listed in London, given its size, portfolio and discount to NAV,” said Mark Mobius, Executive Chairman, Templeton Emerging Markets Group, who oversees the fund’s local management, and who attended the London listing event. 

Fondul Proprietatea has net assets (NAV) of USD 3.15 billion (as of March 31, 2015) and its shares are currently trading at a 24% discount.

Investors in London bought global depository receipts (GDRs) worth some USD 30.5 million, representing more than 1% of the fund’s capital. The GDRs closed the first trading day at USD 11.45, setting a market capitalization of about USD 2.8 billion.

“We are convinced that the secondary listing of the Fund on the LSE will increase the visibility of the Romanian capital market on the international scene, will facilitate access of a broader base of foreign investors to the country, and will act as a catalyst towards unveiling Romania’s many other investment opportunities. We have witnessed a huge interest for Romanian companies during our numerous roadshows to raise awareness for the Fund abroad and we are confident that the Fund’s listing on the LSE will increase the appetite of investors for Romanian equities,” Mobius added.

Fondul Proprietatea currently invests in some of Romania’s largest listed companies such as OMV Petrom (the largest oil producer in Romania), Romgaz (the largest gas producer) and in large unlisted state-controlled infrastructure assets such as Bucharest Airport and the port of Constanta. The Fund also offers its investors exposure to Hidroelectrica, one of the largest hydro-power producers in Europe, as well as to natural commodities monopolies such as the salt mining company Salrom, none of which are listed. 

“Fondul Proprietatea is ideally placed to offer investors exposure to a diversified range of Romanian listed and unlisted equity securities that should benefit from Romania’s steady growth perspectives and strong economic fundamentals. The valuations of Romanian companies are low compared to surrounding countries and we see this as the perfect timing for investors to access Romania given that it trades at one of the lowest price/earnings ratios and offers the highest dividend yield compared to other countries in Central and Eastern Europe,” said Greg Konieczny, CEO and Fund Manager of Fondul Proprietatea.

Fondul Proprietatea’s shares have been trading on the Bucharest Stock Exchange since January 2011. The FP shares lost 0.9% on April 29, closing the day at RON 0.91 per share. The trading value was only USD 3 million, ten times lower than in London. The shares are trading in Romanian currency RON while the GDRs in London are trading in US dollars. One GDR stands for 50 shares.

Fondul Proprietatea was originally setup in 2005 to compensate Romanians whose properties were seized during the communist regime. Following an international tender process, Franklin Templeton was appointed in September 2010 as fund manager.

More than half of the fund’s shares are currently held by foreign institutional investors. American hedging fund Elliott is the biggest shareholder, with just over 20% of the fund’s voting rights.

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Andrei Chirileasa, andrei@romania-insider.com