World finance giants are vying over Property Fund

Eight of the largest international financial institutions are in the race for managing the four billion-euro assets of the Property Fund (Fondul Proprietatea). Yet their capacity to efficiently manage this money can be doubted considering some of them have been at the state’s mercy lately or have had to restructure due to the financial crisis.

The former investment banks that wreaked havoc on Wall Street and caused the international turmoil are now selected by the Romanian state, which will pay fees to them to efficiently manage the Property Fund. Annual management fees on the asset management market stand at 1 to 2% of the value of the assets, which would lead to a 40 to 80 million-euro profit from the management operation every year for the winning company. Eight companies submitted bids to the Commission appointed to choose the manager of the Property Fund. They include international financial sector heavyweights like ING Invest Management, Morgan Stanley, and Julius Baer. Other companies are AVIVA Global Services, BlackRock, FINAG Holding (the asset management consortium of Erste Group) and Franklin Templeton Investments. “If the Property Fund continues ahead, it needs management and we’re talking asset management here. It’s true that some institutions had problems, but that does not mean there are no more people you can trust there. If we take it like this, we won’t be doing anything,” commented first vice-president of the Democrat-Liberal Party (PDL) Theodor Stolojan. ING Invest Management is the investment management division of the Dutch ING group. The parent-bank got a 10 billion-euro loan from the Dutch state last year. Also last year Morgan Stanley ceased to be an independent investment bank and became a bank holding company due to losses, falling under the regulation of the Federal Reserve. FINAG Holding is the asset management division of Austrian group Erste, which is in talks with the Austrian state to get financial aid. Contacted by ZIARUL FINANCIAR, Enache Jiru, recently appointed chairman of the Commission that will choose the manager of the Property Fund, declined comment on the financial situation of the companies part of the selection process. “We got bids from the big names in asset management worldwide. Considering the minimum number was three bids, that eight companies submitted bids shows how interesting the Property Fund was,” Jiru said. Last summer, almost four times more companies sent letters of intent. One of the requirements the future manager had to fulfil was to have managed more than 30 billion euros in total assets in 2006 and 2007, which left Romanian managers out of the race for the Property Fund right from the start, considering all the twenty local managers manage total assets worth approximately 300 million euros.