Foreign funds acquire significant chunks of SIFs

Foreign investment funds have been strongly buying into the financial investment companies (SIF) over the last few months, coming to hold more than 10% of their capital, following the lifting of the restriction on buying more than 0.1% in each SIF.

Investors can now buy up to 1% in each SIF, which means they can invest up to 15 million euros in the five SIFs. Until a few months ago, no foreign fund could invest more than several hundred thousand euros in SIFs, a figure that some fund managers felt was not worth the effort.

“The foreign investment funds have come to total 12-13% of our capital. Their interests revolve around this figure, because some buy and some sell,” says Costel Cocea, SIF Moldova vice-chairman. He added the main countries of origin, as far as the investment funds listed as shareholders in his company are concerned, were Greece and Cyprus.

SIF Transilvania has about 15% of its shares controlled by foreign investment funds, Mihai Fercala, the company”s chairman, said recently.

SIFs have a very fragmented shareholder structure, so that the 10-15% stakes already held by foreign funds account for a lot when the General Meeting of Shareholders comes to do the maths.

“The foreign funds have indeed made purchases after the lifting of the threshold. I have foreign clients that have reached 1%,” said Valerian Ionescu, head of operations at CA IB Securities, the brokerage firm of the HVB Group. “When buying SIFs, the foreign funds buy a portfolio of Romanian stocks, relying on the growth prospects in Romania. Compared with the acquisition of a regular stock portfolio, an investment in SIFs comes with the disadvantage of not being able to drop those shares that appear too expensive to you,” Ionescu added.

The investors behind the foreign investment funds do not usually like the idea of their managers putting money into other investment funds, like SIFs for instance, because most of the time this means the investors must pay management fees for their money to be invested.

Many managers, however, see the SIFs as a lucrative business, not because of their capacity to manage portfolios, but due to the fact that, according to certain calculations, they are undervalued on the Bucharest Stock Exchange.

Though not acting collectively, the foreign investment funds could become the most important SIF shareholders.

Still, it is highly unlikely that they will change the way in which SIFs are being run.

“The foreign funds are passive investors most of the time, they rarely vote during General Meetings of Shareholders and do not nominate people for the Board of Directors,” Ionescu explained.

The SIF shares have been among those most closely monitored by the analysts of the brokerage firms working with foreign investors after the lifting of the cap on stakes. Many analysts estimate a value of over 2 RON per SIF share, with only one of the five companies, SIF Oltenia, currently exceeding this value.

vlad.nicolaescu@zf.ro