RIC logs average 13.9% yield in five years

Romanian Investment Company (RIC) Cyprus, one of the leading investment funds on the Romanian market has produced a 13.9% annual yield for its investors over the last five years, in spite of the definitely weak start in 1998, the report of Foreign & Colonial, the fund’s management company, shows.

The fund achieved this performance even though back in the days of sharp decline witnessed by the Bucharest Stock Exchange and by RASDAQ (1999-2000) its managers would have considered themselves lucky if they had got at least 80% of their money back.

Although very good considering the prospects two years ago, RIC’s performance (way above the banking interests) is below those usually targeted by funds raised for investments in shares on the stock markets of the emerging countries, i.e. 30% a year.

The fund’s performance was actually saved by the surge of the Stock Exchange in 2002 (119%) and 2003 (22% so far).

RIC was established in November 1997, a time when foreign investors were very enthusiastic about Romania, and its life is coming to an end this month. Started out with more than $40 million in capital, the fund has only $1.7 million in assets left after massive sales of shares in the last two years.

After having held significant stakes in companies like Alro Slatina, Terapia Cluj, Automobile Dacia, Banca Transilvania, Rolast Pitesti, Imsat Bucharest or Turbomecanica, the fund was left with only small interests in Compa Sibiu, Ciprom or Electromagnetica at the end of November.

The shares in its portfolio actually accounted for only 28% of the total asset ($1.7 million), with the rest made up of cash.

The performance of the fund is due to both success stories (Alro Slatina, Banca Transilvania, Terapia) and to failures (Banca Turco-Romana) or quasi-failures (Automobile Dacia). The fund’s worst investment was Banca Turco-Romana (Turkish-Romanian Bank – BTR) which went bankrupt in July last year, so that its shares are listed as zero value in the fund’s financial statements. The shares of the bank were also listed on the London Stock Exchange and the fund preferred to buy global depositary receipts over there.

The fund’s first significant exit from the Romanian market took place in 2001, when it sold 10% in aluminium smelter Alro Slatina for more than $10 million.

Its shareholders (RIC is listed on the Dublin Stock Exchange) later decided to reduce the fund’ life span due to the lack of opportunities on the Romanian stock markets.

As of 2002, RIC decided to sell its interests in large amounts and allocated the money therefrom received to dividends (for its shareholders) or invested it in Romanian corporate or state bonds.
laurentiu.ispir@zf.ro