Ministry of Finance prepares the first fund dedicated to the local private equity market, with IDB as main investor and EBRD as partner. Nazare: „Countries shifting their focus to this industry can gain a lot in 5-10 years”

The Ministry of Finance is preparing a memorandum to initiate a fund of funds dedicated to investments in the local economy, minister Alexandru Nazare announced on Wednesday during a conference organized by ROPEA (Romanian Private Equity Association).

Nazare stated that the memorandum will soon be approved by the Government and will involve the management of the fund by the European Investment Fund (EIF), with the Investment and Development Bank (IDB) as the main investor, but also with the prospect of the EBRD joining as an investor. After the memorandum is approved by the government, a memorandum of understanding will be signed between the IDB and the EIF, along with several agreements on financing, capitalization and on the principles of investment implementation.

According to him, the fund will be one of three support pillars of the architecture for the local private equity and venture capital industry, designed to bolster innovation and entrepreneurship in Romania, but also to change the structure of economic growth with an increasing focus on private investments.

„The Ministry of Finance has proactively initiated the process of establishing the first fund of funds dedicated predominantly to the local market. We are subsequently continuing our cooperation with the European Investment Fund as the manager of this initiative. The IDB will be the main investor, with a catalytic effect in attracting suitable local fund managers and additional international financial institutions, such as the EBRD (or IFC – International Finance Corporation). In recent months, we have had discussions with both the EIF and the EBRD, and we have very good signals from both that they want to participate, and this is a very important step forward. We are preparing the initiation of this fund of funds through a memorandum that will be approved very soon by the government,” said Nazare at the ROPEA conference „Partners in Growth: The Impact of Private Equity”.

„Countries shifting their focus to the private equity industry can gain a lot within 5-10 years”

The interim finance minister sent a message of support for the private equity industry, stating that the scale of investments needed in Romania, in infrastructure, energy, digitalization, advanced technology and industrial transformation, requires a broader and more mature investment ecosystem, not just public investments.

„The industry is much more important than it is given credit for, and the Romanian economy must strengthen these ecosystems. This is the future, in my opinion, and countries that understand this and shift their focus towards it can have a lot to gain in 5-10 years,” Nazare said.

According to the minister, the next stage of Romania’s convergence will increasingly depend on the ability to mobilize institutional and private capital at scale, and less on budgetary resources and European grants.

„In this context, private equity and alternative investment structures have an increasingly important role to play, not only as financial instruments, but as mechanisms capable of accelerating innovation, strengthening governance, supporting entrepreneurship and improving long-term competitiveness, beyond what these other instruments can offer,” said Alexandru Nazare.

The architecture for the Romanian private equity industry

The government official presented his vision of the architecture for the next stage of industry development, given the Ministry of Finance’s efforts to change the economic growth model, by shifting emphasis towards investments and especially private investments.

Nazare’s statements:

• Firstly, we are strengthening the role of the IDB, the Investment and Development Bank, not only as a financing institution, but as an institutional platform capable of attracting domestic and international capital. This direction is reflected in the measures recently adopted through Emergency Ordinance No. 8, the so-called Economic Recovery Package, which aims to stimulate for the first time strategic investments through modern mechanisms for capital mobilization and a stronger involvement of the IDB and investment structures capable of attracting private and institutional capital alongside public resources. Perhaps we have spoken too little on the public agenda this month about the changes made through this Economic Recovery Package, especially for the IDB – the possibility of creating investment vehicles or joining investment vehicles, which actually shows that we have changed the financing paradigm for a very long time and at a very important time.
• Secondly, Romania is already actively participating through the IDB in several important regional investment initiatives within the Three Seas Initiative. We have allocated EUR 20 million to the Three Seas Initiative Investment Fund, which supports strategic regional infrastructure and connectivity projects. EUR 20 million to the Three Seas Innovation Fund, managed by the EIF, which focuses on innovation, technology and hybrid companies in the region. And, more recently, together with partner countries, we signed a Memorandum of Understanding on the establishment of new Three Seas Funds, which will also be managed by the EIF, to which Romania intends to participate also through the IDB with an additional EUR 25 million.

• These initiatives prove Romania’s commitment not only to participate in regional investment platforms, but also to actively contribute to the development of a stronger regional capital ecosystem.
• Thirdly, the Ministry of Finance has proactively initiated the process of establishing the first fund of funds dedicated predominantly to the local market. We are consequently continuing our strong cooperation with the European Investment Fund as the manager of this initiative. The IDB will be the lead investor, with a catalytic effect in attracting suitable local fund managers and additional international financial institutions, such as the EBRD. In recent months, we have had discussions with both the EIF and the EBRD, and we have very good signals from both that they want to participate, and this is a very important step forward. We are preparing the initiation of this fund of funds through a memorandum that will be approved very soon by the government.

„Constructive” talks with Pillar II fund managers on investments in private equity funds

The Minister of Finance further stated that constructive discussions with the administrators of Pillar II private pension funds were carried out in order to increase the contribution of the capital accumulated in these funds to economic growth, through investments in venture capital funds that would further invest in the development of companies in the real economy.

„In terms of local demand for these structures, we have also had constructive talks with pension fund managers and the Financial Supervisory Authority. These discussions follow a recent increase in the limit applicable to investments in private equity funds in which the state is also an investor, either directly or indirectly, including through the IDB. This is, in our opinion, a win-win arrangement,” said Alexandru Nazare.

He also stated that local pension funds need diversification, and given the long-term nature of their horizon, this is a solid starting point.

Nazare: „We aim to develop an investment platform capable of attracting institutional investors, to support the development of the local private equity market and infrastructure investments”

„It is also a structure that will mark the beginning of a learning curve for the IDB, in close partnership with the European Investment Fund. Our objective is to develop a credible and, above all, scalable investment platform, capable of attracting long-term institutional investors to the Romanian economy and supporting the development of the local private equity and infrastructure investment market,” stated Nazare.

According to him, this direction is convergent with objectives established at the European level, within the Economic and Investment Union, which aims to channel the savings of European households towards productive economy.

„In particular, the participation of domestic institutional investors, such as private pension funds, will be essential for strengthening Romania’s long-term investment capacity and for mobilizing domestic economies towards productive investments. The involvement of international financial institutions and the European Investment Fund is particularly important, not only because they help financing capacity, but also because they bring governance standards, technical expertise and international credibility, essential for attracting institutional capital at scale,” said Nazare.

He also stated that, in terms of principles, the state cannot and should not replace private capital. „Our role is to create the institutional frameworks and investment conditions that allow private and institutional capital to develop efficiently. The next stage of Romania’s economic convergence will increasingly depend on our ability to create investable structures, to strengthen partnerships between public institutions and private investors, and build a more mature financial ecosystem, capable of financing innovation, infrastructure, and long-term economic transformation. Romania is committed to being an active contributor to this transformation, both nationally and regionally,” Nazare added.

***