FNI managers are keeping a low profile after their fund went down. This is the best way to describe what happened at the FNI. What has actually happened will only crop up after the investigation that will probably begin.
What we know for now is that, when the fund was no longer able to cope with payments, its managers have “laid low,” nowhere to be found, although the captain is supposed to be the last one to leave a sinking ship.
What we also know is that the fund had collected more than 3 trillion lei, that it “de-liquidised” this money with financial placements and that the pace of “re-liquidisation” has been utterly insufficient to honour investors’ withdrawal requests, making payments stop altogether. Whether the placements have been just risky, but still within the rules, or whether they have been improper or downright fraudulent, will be revealed in the investigation.
Whatever that investigation will reveal, FNI managers “made a pass” at the fund they managed. And this accusation stands even if they have not necessarily embezzled funds for personal gain. This would only be the criminal side. But bankruptcy means the managers have not stuck to the rules of management and, what’s worse, they disregarded the actual situation, the possibilities of the capital market in Romania. Mutual funds are not expected to keep the resources they attract in liquid form, because their purpose is not to hold on to money but to place money into business. But with this in mind, they can cope with potential withdrawals only if they can quickly convert their share holdings back into cash. But this can only happen on a fluid capital market, with sufficient resources and, of course, a manifest interest in shareholding. And the capital market in Romania is small and handles minor liquid resources. As to interest in shareholding, nothing can be more telling than the fact that prices are rather falling than rising.
So a risky placement on a normal capital market becomes nothing but a reckless placement on a weak capital market, such as the Romanian one, because it is not a matter of winning or losing money: it’s money out the window. What are placements in so-called “unlisted shares” – which are said to account for 40% in FNI placements – but recklessness? Of course, provided there are no biased arrangements involved! Because “unlisted” shares belong to companies that are not bound even by minimal transparency regulations imposed on the Rasdaq, let alone the BVB!
FNI managers cannot say they were not aware of all this. Their fault may not be that of managing the money into bankruptcy, but that of systematically seeking to persuade their investors of the fund’s “attractiveness” as opposed to other investment options, with promises of unrealistic gains and with aggressive advertising, which, as you may recall, encouraged investors to sleep at rest and let the FNI work for them. Now they are suddenly and sharply awake, but the fund has fallen asleep, in a deep trance, and no one can wake it up.
The FNI resembles its precursor, SAFI, like two peas in a pod. The same promises of unrealistic returns, the same enthusiastic promotion campaign, the same placements that “de-liquidise” resources in the long term or forever, with no chances of rapid “re-liquidisation.” And, what is worse, the ship was again deserted, by crew and captain alike. With the SAFI affair, Mr. Catarama took all the responsibility, an even more remarkable gesture considering that his own companies had borrowed from the fund. And although the problem remained and the SAFI losers remained losers, he did not run away as those directly responsible for SAFI did: its former president, Mr. Danielescu, and Mr. Ovidiu Nicolescu, chairman of the Trust Council, the very person who should have been watching on investors’ behalf over a reassuring management. Instead of assuming responsibility, they withdrew their money from the fund and only returned it, when the scandal broke out, because of pressure from Mr. Catarama.
In a normal country, such behaviour would result in excommunication from the financial community and the business world. But they are alive and well. Mr. Danielescu seems ready to put together another fund, rising from its own ashes like Phoenix. And Mr. Nicolescu is everywhere in his stead of fighter for facilities to small and medium enterprises, oppressed by the bad guys and protected by the wolf hired to guard the sheepfold. As for the other major figure involved in the SAFI affair – the acting president director general at that time, no one else but Mr. Dan Constantinescu – today he is president of the Budget-Finance Commission in the Lower Chamber. And it’s only been four years since SAFI broke down! Today, in the year 2000, we can expect the missing FNI managers will come back soon enough, somewhere around 2004!