In August 2024, the National Investment Fund (UzNIF) was established by a presidential decree and is now fully owned by the Ministry of Economy and Finance. The fund holds equity stakes ranging from 20% to 40% in 18 key state-owned enterprises.
In February, the Ministry announced the engagement of Franklin Templeton, an international asset management firm, to provide professional management of UzNIF’s assets. Franklin Templeton Asset Management received its trustee license from the National Agency of Perspective Projects (NAPP) in April.
On May 1, Franklin Templeton Asset Management officially began its role as trustee of the National Investment Fund. According to reports by Deloitte and KPMG, UzNIF’s initial net asset value stands at approximately $1.68 billion.
Spot spoke with Marius Dan, CEO for Central Asia at Templeton Global Investments, about the establishment of the National Investment Fund, the transformation plans for the 18 state-owned companies within its portfolio, and the upcoming plans for listing on local and international stock exchanges.
Why was the National Investment Fund of Uzbekistan created, and what are the main objectives of the UzNIF?
The National Investment Fund has been established by the government as a vehicle to help with the development of the local capital market, transformation of the state-owned companies, and improvement of the corporate governance of the portfolio companies.
We have equity stakes in 18 large state-owned companies. It’s a well-diversified portfolio of attractive assets in Uzbekistan that should attract a lot of attention from global institutional investors because of how the fund is structured. The Fund will act as a proxy for Uzbekistan.
I think that a lot of institutional investors would like to have exposure to Uzbekistan, recognizing the reforms that have been implemented over the last few years, but especially where the republic is going to go from this point forward. So, we think UzNIF will provide an excellent opportunity to give institutional investors exposure to this diversified portfolio of companies and the country.
The management of UzNIF was entrusted to a foreign company — Franklin Templeton Asset Management. Why did the government choose not to manage the NIF independently and outsource it?
The government of Uzbekistan selected Franklin Templeton as a partner for this project, and we are truly honored to be involved. We are committed to supporting the president’s objectives for the National Investment Fund, leveraging our extensive experience and strong track record in managing assets across emerging and frontier markets, as well as our successful management of a similar fund in Romania.
For the last 15 years, we have managed a fund called Fondul Proprietatea (Property Fund), which was established by the Romanian government in a similar model, with large minority stakes in some of the largest state-owned companies. We listed the fund on the Bucharest Stock Exchange and on the London Stock Exchange. The Fondul fund delivered and managed to create a lot of shareholder value with strong performance enabling Franklin Templeton to attract a lot of institutional investors into the country. The share price of the fund has increased almost 10 times since we listed the Fondul fund on the stock exchange.
So, the Uzbekistan government selected us as a partner based on our proven track record of delivering shareholder value. We hope to not just replicate but exceed that performance and deliver that shareholder value for Uzbekistan.
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Negotiations between Uzbekistan and Franklin Templeton lasted several years. In February, an agreement was signed with the Ministry of Economy and Finance. What issues required prolonged negotiations?
From our perspective, time has flown very fast because there were so many things to do to establish UzNIF, including portfolio construction. We worked very closely with the government regarding what companies should be included in the fund. We started with the Memorandum of Understanding a couple of years ago. Given the complexity of what is required it is typical to take significant time, and we’re very happy that we completed the process at the end of 2024.
Is UzNIF considered as a commercial institution aimed at maximizing profit from its activities or is it like a quasi-governmental agency?
The UzNIF is established as a joint stock company, it operates as a closed-end fund, with Franklin Templeton appointed as a trustee and fund manager. The objective of the fund is to deliver value for the government, because the Uzbek government is a sole shareholder at this stage. We will deliver value to international shareholders once the fund is listed and through our work with the portfolio companies to help enhance their corporate governance, efficiency and profitability. Through this we will deliver significant value to the government and to all shareholders.
Does Franklin Templeton as executive body of UzNIF and that the fund bears some forms of liability for UzNIF’s obligations to stakeholders?
Because we are the trustee and fund manager of the fund, our activity is supervised by the supervisory board of the fund. But we are accountable for achieving the objectives and the milestones that have been set by the shareholder, ultimately, in front of the supervisory board as the oversight body of the fund, but also in time to international shareholders as well.
There are three pillars that will contribute to the success of the mandate. The first one is the IPO pillar because we are responsible for the listing of the fund on the local stock exchange and on an international stock exchange to allow and to attract a lot of global institutional investors into the country. Once the companies are prepared, our portfolio companies will also IPO on the local exchange and some on an international stock exchange.
The second pillar is the work that we are doing on the transformation of the portfolio companies. This will focus on driving increases in transparency, efficiency and profitability. By doing this the government will achieve its objectives of these companies achieving a higher valuation when they IPO.
And then the third pillar of the mandate is the changes to the corporate governance because we appreciate the government’s desire to bring more independent oversight of the portfolio companies, and we hope to help in that regard.
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Does Franklin Templeton have some specific KPIs to get some profit for your services?
I think we have very strong KPIs in our mandate. One KPI that I would highlight is related to the IPO. We have to list the fund completed in 2026. The work has already started because we are currently in the process of selecting the equity advisors of the IPO.
The other KPI is focused on the Net Asset Value (NAV) growth, so we have a hurdle rate for the NAV to grow at least 10% per year. We also have KPIs related to supporting the changes to the corporate governance within the portfolio companies.
The National Investment Fund’s portfolio includes equity stakes in 18 major state-owned enterprises. How does Franklin Templeton Asset Management assess its investment portfolio? What is its potential?
We think there is significant growth potential in the portfolio of 18 companies that are included in the UzNIF because they are very attractive sectors that will give tremendous exposure to the local economy, to the reform process that has been going on in Uzbekistan. For instance, we strongly believe that there is a huge potential for development in our portfolio companies in the energy sector, because the economy is growing, the demand for electricity will continue to grow in Uzbekistan. So, our portfolio has excellent exposure to that part of the economy.
But we have excellent exposure to sectors that will, given the country’s growth, be ideally placed to drive value for shareholders. For example, the banking sector whose purpose will be to support this growth. Furthermore, we have exposure to the infrastructure sector, through the airports, to the airlines. And then we have additional consumer exposure through Uzbekinvest, Uztelecom and Uzpost. It’s a very well-diversified portfolio of assets that will give investors the desired exposure to the local economy.
What risks does Franklin Templeton Asset Management see in implementing the project in Uzbekistan, and how does it plan to mitigate them?
We think there’s a lot of opportunity. Yes, there are always inherent risks when taking an investment decision. But we think that the opportunity is far greater than any type of risk in Uzbekistan. If you look at the underlying dynamic of the economy, the reform process, and the reforms that have been implemented over the last few years, but especially what’s going to happen from this point on, many key risks are mitigated.
In terms of how we go about mitigating risks, it’s really focused on understanding the portfolio companies. Top to bottom, bottom up, and to work very closely with the management teams and the supervisory board to help them at every step of the transformation process.
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What criteria will Franklin Templeton use when developing individual strategies for each of the 18 companies included in the NIF? Will the approach be sector-specific or will a unified transformation model be applied?
We don’t think that there is a ‘one strategy fits all' approach because if you look at each of the individual companies in our portfolio, they have particularities, and our intention is to develop the strategy at the individual portfolio company level to really cater to the needs of that specific company. Of course, some of the changes that may be implemented should be structural changes at the sector level, whether it’s in the energy sector or in the banking sector, but our focus is very tailored to the needs of each individual company.
Our goal is to have 18 strategies individually tailored for each company, to help them achieve their objectives. For example, whether it’s growing the airport to cater to the future passenger growth in the country, because we’ve seen very encouraging numbers in 2024 and a lot more business travel will take place as more companies come to establish greenfield investments in Uzbekistan. The airport is the gateway to the country. Future passenger growth from 13 to 20 million passengers may happen very quickly and we just want to make sure the airport is ready to cater to that type of booming demand.
First and foremost, we will look at the needs of each individual portfolio company. But there are some structural changes that will be implemented with the support of the government at a sector level, which will contribute to each company achieving their objectives individually and their KPIs.
Will 18 strategies be published on the site of UzNIF?
We strongly believe in increasing transparency and our website for the UzNIF already has been launched. A lot of information will be published there — including financial statements of the portfolio companies and annual reports — because we want the fund’s website to serve as the primary gateway to information for institutional investors.
These investors will conduct thorough due diligence on the fund itself and will want to understand the business models of the portfolio companies. The website should help facilitate access to that information.
Naturally, strategies will first be discussed individually with the portfolio companies. However, the annual reports will provide much more disclosure about the companies, their performance, and their objectives.
Will UzNIF publish a report on its activities and performance indicators every year?
Of course, our intention is to publish a quarterly report for the fund itself, as well as an annual report which will detail individual portfolio company developments and progress that we’ve made at the portfolio company level.
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Should we expect the annual report to be published this year?
Well, in the first instance you will see quarterly reports being published as we are effectively starting the management of the fund from the 1st of May. We anticipate publishing our first annual report in 2026.
How does Franklin Templeton plan to work with state-owned banks to enhance their investment appeal and prepare them for possible partial privatization?
We have “Xalq Bank,” the “Business Development Bank,” and “Microcreditbank.” The individual strategy for each of these banks will be determined in coordination with the government.
Our goal is to support them throughout their transformation process — whether by enhancing digitalization or by helping them access additional funding to meet the strong demand from their customers. At every step, we aim to support the banks in achieving their objectives.
As for the actual strategy — whether the banks will be privatized or listed — I believe it is too early to say. In order to achieve the valuations these banks deserve, certain structural reforms need to be completed first. However, we are working in close coordination with the Ministry of Economy and Finance, the Central Bank, and all relevant stakeholders.
Will you ask the government to reduce its influence on the three state-owned banks in order to increase their profits and improve their performance? Because they have a lot of non-performing loans (NPL), which worsens their performance.
It’s early days, so we are looking very closely at the banks and the portfolio. We’ve already met with all the companies in the portfolio and the banks as well. We have an understanding of the underlying dynamics and we’re here to contribute because I think there is a desire from all stakeholders to see the banks succeed and to be able to deliver profitability to the shareholders. We will certainly be supporting that process.
Will you advocate for equal rules of the game for everyone in the banking sector of Uzbekistan? For example, “Xalq bank” has the exclusive right to transfer pensions and other social benefits. The Central Bank has long advocated the abolition of this, but, alas, unsuccessfully.
We fully understand the importance of expanding access to banking services — that is, in fact, the primary aim of government-sponsored lending programs. We want the people of Uzbekistan to have broad access to financial services, and we are committed to helping unlock the sector’s full potential.
With a rapidly growing population, the demand for financial services is enormous. It’s not just the state-owned banks — the entire banking sector must be empowered to respond to this growing need.
We are focused on helping implement change to ensure the banks reach their their desired profitability levels so that they can contribute with dividends to the state budget and we will be working very closely with the Ministry of Economy and Finance and with the Central Bank to help and support these goals.
Photo: Evgeny Sorochin / Spot
What changes in corporate governance and operational activities does Franklin Templeton intend to implement in these companies, including changes in board composition, internal control systems, or financial reporting?
From a governance perspective, we hope to support the desired transition to boards containing more independent board members. And to that end, our intention is to have our investment team sit on the board of all the 18 portfolio companies. This will give us a very deep understanding of the operations of the companies as well as enabling us to support their development from a supervisory level.
On the governance side, it’s increasing the independence, supporting the government and finding more independent board members to bring on the boards of the portfolio companies. From an operational standpoint, we will focus on key areas such as improving transparency and facilitating the transition to IFRS reporting standards. These and other enhancements will be carefully evaluated and supported as part of our broader engagement.
When are the first offerings (IPO) planned, and which issuers will be prioritized? On which platforms, including international ones, will the placements take place?
Our objective is to support the development of the local capital market, as we believe Uzbekistan is home to many strong companies with significant potential. We see promising growth opportunities on both the retail and institutional investor sides, and we expect this market to evolve in ways that may exceed current expectations. Strengthening the local capital market is therefore one of our core priorities.
Let me give you an example — this is something we did very successfully in Romania. The mere listing of the fund can act as a catalyst for the development of the local capital market, primarily by increasing liquidity. Once UzNIF is listed, depending on the size of the stake the government decides to offer in the IPO, we expect a significant boost in liquidity on the Tashkent Stock Exchange as well.
So, to your question, the listing of the UzNIF is our key priority, the work has already started with the selection of the equity advisors, and we hope to have the IPO happen in 2026. It should be a dual listing both on the local Tashkent Stock Exchange as well as an international exchange.
With regards to which international exchange, I think we will work very closely with the equity advisors and with the consortium of investment banks that we select to decide what is the most appropriate venue. We listed the fund in Romania on the London Stock Exchange. I think there is a lot of knowledge of country funds or sector-related funds on the London Stock Exchange, but I also want to hear what our advisors are going to recommend. We will make sure that we find the best possible exchange for the listing of the fund.
What kind of work is underway to reform the local stock exchange?
We’re working with the stock exchange, with the National Agency of Prospective Projects (NAPP), with the Central Bank in order to make sure that the market infrastructure is able to support these types of international transactions and we’ve seen nothing but a willingness to help with the regulatory changes that are needed in order to accommodate the IPOs.
Because it’s not just us, there are other IPO processes, including NMMC, that will need these changes to the market infrastructure. The ultimate goal is not to have the companies just listed on a foreign stock exchange. The goal is also to attract institutional investors to become active on the Tashkent Stock Exchange. We’ve seen that in other markets, and it takes a little bit of time, but the secondary or the dual listings on international markets do act as a hook to bring investors to invest locally.
Photo: Evgeny Sorochin / Spot
Uzbekistan has been trying to attract companies like Clearstream and other major depositories and custodians for several years. Is there hope for change now?
I think you will see change soon. There is a tremendous desire to be present in Uzbekistan. So, you will see global custodians and you will see more players active here to support the development of the local capital market. I’m very certain about that.
Maybe this year?
All these changes need to happen swiftly to accommodate the upcoming listings. There is strong and growing interest in Uzbekistan — from investors, investment banks, and global custodians alike. Everyone is very optimistic and very impressed with the reforms that have been taking place in Uzbekistan and now is the time.
We’ve already seen positive developments in the fixed-income market, where Uzbek companies have successfully raised capital. The next step is to accelerate the development of the equity markets.
The recent presidential decree sends a strong and clear signal to investors: whether it’s the listing of UzNIF or NMMC, these are not isolated events. A broader IPO pipeline is emerging from Uzbekistan — and institutional investors would be wise to take notice.
How do you assess the prospects for success of the UzNIF IPO, given that there have been few successful placements in Uzbekistan so far?
I am absolutely confident in the success of the UzNIF IPO. The macroeconomic situation in Uzbekistan is very positive now, and institutional investors are eager to get an opportunity to invest in the country.
Moving from the macro level to the fund’s portfolio, we have an attractive and diversified pool of assets with significant growth potential that in itself should act as an anchor for a lot of global investors to invest. And thanks to our access to an international investor pool and experience, we will be able to attract even more interest. If we do our job right, UzNIF’s IPO will be a major success not only for the fund, but for the entire country.
I firmly believe that now is the right time to be active in Uzbekistan and gain exposure to the opportunities unfolding over the next few years.
There is a strong tailwind of reforms that have been implemented — these changes don’t happen overnight, but the progress made in recent years is set to deliver significant returns both in the near term and for many years ahead.
When will the office of UzNIF be opened and who will lead the fund? When will Franklin Templeton announce an appointment?
We already opened our office in Tashkent in the middle of April and it’s a clear sign of our commitment to Uzbekistan, our belief in the potential of the country. We have recruited several colleagues across investment, legal, compliance, operations, and administration to scale up our operations here.
I will be leading our efforts in Uzbekistan and the wider Central Asia region, and I’m truly excited to be here. I have been visiting Uzbekistan since 2018−2019, and I firmly believe in its tremendous potential.
The country’s economic growth and development have been remarkable, driven by the outstanding leadership of the president and government. Our mission is to help nurture even stronger Uzbek companies and foster the growth of a robust capital market.
Ultimately, we aim to ensure that institutional investors around the world recognize Uzbekistan’s compelling story — a story rich with opportunities for growth and value creation, benefiting both international investors and the country’s citizens.
