ROMANIA - Franklin Templeton has been appointed as the investment manager for a €2.4bn property compensation fund, set up by the Romanian government, to compensate people who lost their homes during former Communist rule.

Franklin won the Fondul Proprietatea mandate over rivals Goldman Sachs, Royal Bank of Scotland and UBS, and offiicials have hailed the compensation offering as a sovereign fund with a "unique" and "very interesting" structure.

Fondul Proprietatea is designed to compensate those Romanians whose properties were confiscated by Nicolae Ceauşescu and his former Communist government.

The intention is to list it on the Bucharest Stock Exchange, according to David Smart, global head of sovereign funds and supranationals at Franklin Templeton, who recognises the mandate's unusual nature.

"As far as I'm aware, it is a unique structure and a very interesting one," he said, adding the company is applying "a fairly broad definition of sovereign funds" to the single country closed-end investment trust.

Despite the unusual nature of the mandate, Smart is believes there are interesting lessons to be learnt from its structure.

"[Fondul Proprietatea] is to be a flagship investment opportunity for people to get exposure to Romania," he insisted, adding: "I think it would be fair to describe our role as partly to help develop the domestic Romanian capital market on a long-term basis."

The Romanian Government had originally set aside €3.5bn worth of shares in late 2005, before the financial crisis wiped over €1.1bn off its value.

And Fondul Proprietatea's structure is especially unusual because not only will be eventually be a listed fund but the Government will slowly shed its ownership as more and more citizens receive their compensation in forms of shares.

Almost all €2.4bn of equity will be invested in the shares of Romanian companies while a small amount can be invested in international companies, albeit even these "are supposed to be focused on companies that have significant Romanian exposure," according to Smart.

Funds will be ploughed into both the listed and the non-listed sector- a task which Smart considered to be a long-term process.

Franklin Templeton is also in the process of setting up a Bucharest office, where two asset managers will be based to oversee the mandate.

"I think our profile in investing in emerging markets, and the fact that we have local office representation in as many countries as we do, made it quite a natural fit for us to do something like this," argued Smart.

The company originally launched their bid in February 2008, but finalising arrangements took "a great deal longer" than in the past, as a result of market conditions at the time and "what was going on in the world".

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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