UzNIF has made Uzbekistan investable for international funds for the first time, Marius Dan of fund manager Franklin Templeton told IntelliNews in an interview on October 23.
The Uzbekistan National Investment Fund (UzNIF), which holds stakes of 25% to 40% in 13 of Uzbekistan's biggest state-owned companies, raised $603.6mn in a dual listing in London and Tashkent on May 13 that valued it at around $1.95bn.
With the over-allotment option exercised, the Ministry of Economy and Finance sold a 35.45% stake for gross proceeds of $691.5mn. Demand topped $2.9bn, making it the largest IPO on the London Stock Exchange since 2021 by gross proceeds at the time and Uzbekistan's first ever international public equity offering.
Cornerstone investors including BlackRock, Redwheel and the Allan & Gill Gray Foundation agreed to buy $300mn of the global depositary receipts (GDRs).
The listing turned a country that fund managers had long admired from a distance into one they could actually buy. Uzbekistan's equity market was valued at around $22bn this year but had only $350mn in freely traded shares, and the state's previous attempt to sell its jewels to the public ended badly. Carmaker UzAuto Motors' "people's IPO" in December 2022 aimed to raise up to $90mn for 5% of the company, but by the subscription deadline investors had bid for only 8.65% of a much smaller offer cut to 1% of the shares, and the deal was postponed.
Now Uzbekistan is a hot market. At the Tashkent International Investment Forum (TIIF) in June, German President Frank-Walter Steinmeier led a German delegation and a British team was headed by Lord Stockwood, neither of which had come a year earlier, while London Stock Exchange Group chief executive Julia Hoggett called UzNIF "a real success story". The government has since used the deal as a template to pick up the pace of privatisation and has begun to put its state banks up for sale.
Five months after the float, Dan said the shares were up by as much as 40%, two portfolio companies could list in 2027 and the first dividends would reach investors in 2028.
Investable at last
"My view has remained unchanged," Dan said, when asked whether he shared the sense that the IPO had changed investors' attitude to the country. "I knew that the structure, the National Investment Fund that we created together with the government, would be a very successful structure to attract institutional investors from all over the world into Uzbekistan, effectively, because through a diversified portfolio of assets, through a management team like us with a clear track record in managing the similar vehicle in Romania would give investors a lot of confidence that we can make this a success.”
Dan cut his teeth on the highly successful Romanian fund Fondul Proprietatea (FP), which was established by the Romanian government in 2005 to compensate citizens whose property had been confiscated under communism.
US investment manager Franklin Templeton was appointed to run the fund in 2009, formally taking over in September 2010, when its assets were valued at approximately €4bn. The fund became a vehicle for restructuring and privatising some of Romania’s largest state-owned enterprises, particularly in the energy and infrastructure sectors, while improving corporate governance and attracting international investors.
Listed on the Bucharest Stock Exchange in January 2011, Fondul Proprietatea played a significant role in deepening Romania’s capital markets and bringing state assets into private ownership. The experience provided a model for Uzbekistan’s UzNIF, which aims to replicate Romania’s success in transforming state-owned assets into commercially managed investments and bringing them to international capital markets.
"Absolutely very happy with the results of the IPO. Very happy with the performance after the IPO. And it's still early days. We've got a lot of work ahead of us," Dan said of UzNIF since its float. When he first spoke to IntelliNews in June 2025, before the listing, Dan described the fund's mandate as transforming state-owned companies and attracting international investment through listings of both the fund and its portfolio companies - and that is what happened.
He said investors were taking a long view of the portfolio. "What are the assets today? What can they become in one, three-year, five-year period? And the type of impact it could have on the NAV of the fund, because when you benchmark a lot of these companies against listed peers, there's a very clear upside here. But in order to close that gap, we've got a lot of work to do. So that's what we're spending our days on.”
Trading at NAV
"The share price is up roughly 35%, 40% on the London Stock Exchange. And more than that on the Toshkent Stock Exchange. So Toshkent now trades at a very small premium to London and London trades at NAV," Dan said, referring to the Republican Stock Exchange "Toshkent". "But it also gives, I think, insight into the expectations of both retail investors and institutional investors as to where this can go.”
When UzNIF reported its first-half results in August, the GDRs were still at a discount of about 6% to net asset value (NAV). The fund's NAV rose 6.1% in the first half to UZS31.67 trillion ($2.64bn), with almost all of the gain coming from the revaluation of its power companies after the government introduced a regulatory asset base tariff model.
"The NAV compared to the end of the year is up roughly 6%, 7%. And we're going to have another revaluation in the December NAV, which will be published in the third week of January," Dan said. "We do two independent valuations per year that have a more significant impact on the NAV of the fund. But of course, if something happens throughout the year with any of the portfolio companies, we want to be quick in capturing that impact in our NAV as well.”
A small people's IPO, but the biggest yet
Retail investors own only a sliver of the fund, but in local terms the Tashkent tranche was a record. "Even if you look at the success we've had in Toshkent, where it was the largest ever IPO in the local exchange, we allocated roughly $20-plus million to the local market. And that's effectively larger than all the IPOs that took place on the Toshkent stock exchange combined," Dan said.
"But if you look at the retail presence in UzNIF, it's still very, very small compared to the entire fund. So roughly retail investors own 0.65% of the fund. So it's below 1%," he said, putting the holding at roughly $25mn-27mn, mostly owned by Uzbek residents, with some international investors who took part through the local exchange.
Local buyers were offered a 5% discount to the institutional price to tempt them in, and Dan said that sweetener plus the share price rise has given them a return of around 50%, a clear advertisement in a country where savers can earn high rates on bank deposits.
"In Uzbekistan, you do compete with high interest rates on deposits, right? But then when you compare performance of UzNIF share price with the deposit rates, there's a very clear outperformance. So that bodes well, I think, for participation of retail investors and future IPOs," he said.
"You have to start somewhere with developing the retail market and the underlying dynamic of the Uzbek economy is fantastic. So I think in five years or in 10 years' time, we will look back on this moment and say, wow, how much the market has grown and how it's developed, and how the local asset management industry looks today versus when UzNIF got listed in 2026.”
Teaching the country to save
The government is trying to tap domestic savings to fund development, as other states in the region are, and financial literacy is part of the plan. Dan said he met President Shavkat Mirziyoyev on October 19 to review progress and discuss future IPOs.
"One of the topics that we raised, which he reacted very positively to, is this idea of Franklin Templeton launching a cross-country financial education advancement campaign through all the large cities in Uzbekistan, in order to promote not just the capital market, but overall the banking industry, the insurance, the importance of insurance products, the savings opportunities in Uzbekistan," Dan said. "So that's something my team and I will be developing together with the help of the wider Franklin Templeton organisation for the duration of next year.”
Industry is pushing in the same direction. The government launched a new Energy Council on October 16 that brings together the biggest local energy players and prospective strategic investors, and Dan said its members had raised the capital market themselves.
"They themselves brought up this idea that we can only develop the energy industry by having a stronger, broader, deeper capital market in Uzbekistan that allows strategic players to maybe raise funding on the local market as well," he said. "So it's not just us. Everybody's now looking at how key a role the capital market will play in Uzbekistan for the foreseeable future.”
A deep pool of buyers
Uzbek companies have also been tapping the local bond market, and Dan expects more deals in both debt and equity now that private issuers have seen UzNIF's reception. Digital conglomerate Uzum, which borrows on the domestic market and from development banks, is now eyeing international bonds while keeping plans for an IPO of its own.
"It's very early days. I think we're going to see a lot more transactions, both on the corporate market, bond market, as well as on the equity capital market, because private players are looking at what we have done, and the fact that there is an appetite from risk investors from all over the world," Dan said. "We had more than 160 institutional investors that participated in the IPO of UzNIF. That's a very, very deep pool of potential investors for our IPOs as well as private IPOs.”
He rejected the idea that a frontier-market fund could only appeal to a narrow set of frontier and emerging market specialists. "It goes back to two things. One, how powerful a structure like this can be in tapping pockets of global demand from institutional investors, not restricted to emerging markets or frontier markets," he said. "We have in our portfolio SQB, which is one of the largest banks in Uzbekistan. We have infrastructure, we have transportation, we have energy. Those are also attractive to certain specific investors.”
The second factor was the marketing network built over 15 years in Romania, which Dan said had drawn investors from New Zealand and Australia to both coasts of the US, Canada, the Middle East, Europe and the UK. "Investors that would not normally look at specific country funds. But because you have an international asset manager who is managing this, we have a clear track record of what we've done. We've always acted in a predictable and shareholder friendly way. A much broader pool of investors are comfortable in participating.”
"When you look at the cornerstone investors, you had BlackRock, you had Redwheel. Redwheel is certainly an EM and frontier market player. We also had the Allan & Gill Gray Foundation, which is investing all over the world. So it's quite a diversified pool of investors," he said. BlackRock has since said it sees growing investment interest in both Uzbekistan and neighbouring Kazakhstan.
The Fondul factor
Franklin Templeton has managed Romania's Fondul Proprietatea since September 2010, and the Romanian fund was the model the Uzbek government bought into when it appointed the firm to run UzNIF. Dan said both the country story and the manager's track record mattered.
"Uzbekistan certainly has been more and more on the radar for global investors because of the reforms, because of what the president has done over the last almost 10 years now, especially the strong growth that we've seen over the last two, three years," he said. The economy has grown by at least 6% a year since Mirziyoyev took power in 2016, apart from a pause in the pandemic, and GDP expanded 7.7% in 2025.
"And you never had a way to get access to Uzbekistan, an attractive, compelling way to access the local capital market. And that's what we've built through the National Investment Fund structure," Dan said.
"Governance is very important for institutional investors globally. So having someone like Franklin Templeton with the track record that we built in Romania - I've been part of the team since the beginning of our management of Fondul in Romania - so that also had, I think, a significant contribution in giving investors comfort," he added.
Dan said companies following UzNIF to market would be judged on their own merits. "Now when every other company comes to the market, investors will already know the macroeconomic story of Uzbekistan. They already have exposure to Uzbekistan. They pretty much know the dynamics. The focus is going to be on the business case for every single company that will come to the market over the next few years, which is a huge accomplishment, I think.”
Plumbing between London and Tashkent
The two listings are fully connected, so price gaps between them are quickly arbitraged away. "In the early days after the IPO, Tashkent was trading at quite a significant discount compared to the London Stock Exchange. Now it trades at a very small premium to the LSE," Dan said. "On a relative basis, the amount that we allocated in Uzbekistan versus the turnover that we've seen on the local market, Tashkent on a relative basis is slightly more liquid than the London Stock Exchange, which is interesting.”
"Now it's basically fully fungible. So any investor in London, if they see a discount developing on the Tashkent Stock Exchange, they can convert GDRs, potentially sell them on the Tashkent Stock Exchange," he said. "When there was quite a significant discount on the Tashkent Stock Exchange, investors basically bought shares locally, converted into the GDRs and had GDRs delivered on the LSE.”
"We have the Bank of New York Mellon as the issuer of the GDRs. The markets are fully connected, so there's no issue there. It makes it very, very easy to trade on both markets and take advantage of potential arbitrage opportunities," he added.
A link to the Clearstream settlement system, which helped open Russia's bond market to foreign investors more than a decade ago, is still pending. "On Clearstream, I know that there's continued work being done on this, but I don't have any further updates for you," Dan said. He said trading would be easy regardless, with the Bank of New York Mellon involved, Bank of Georgia acting as local custodian and more banks looking at opening custody services in the country.
"What I hope to see in the next couple of years is significantly more institutional investors opening their accounts locally," he said. Some foreign institutions opened local accounts during the IPO to win a better allocation, and got one, as "the allocation in Tashkent for institutional investors versus the overall allocation for the transaction on the LSE, was higher in Tashkent, because there was significant competition on the LSE for allocation.”
A digital retail market
Dan dismissed concerns about a shortage of local brokers. Three domestic managers, Alkes Research, Avesta Investment Group and Bluestone Financial Group, which is run by Quinn Martin, worked on the IPO. "We're very happy with the performance of the local brokers. And then you have a lot more brokers that are active locally," he said.
Uzbekistan had just 24 fintech companies in 2018 and 103 by September 2025, and the central bank is driving a plan to make the country a regional fintech hub by 2030. Uzum, which became the country's first tech unicorn in 2024, had 10mn average monthly users on its super-app in 2023, and companies are now building integrated fintech platforms that combine banking, payments, lending and ecommerce.
"Because Uzbekistan is so highly digital, given the young population, you have more trading apps that allow retail investors to be active on the local exchange," Dan said. "I think we've seen roughly three, four thousand accounts being opened on a monthly basis, effectively since the IPO of UzNIF. We now have close to ten thousand shareholders locally in Uzbekistan, which is terrific to see.”
Breaking out the portfolio
UzNIF's 13 holdings include a 25% stake in Uzbekistan Airways, whose separate IPO of 15-20% is being prepared, as well as stakes in the power grid, Uzbektelecom and lender SQB. The fund has no exposure to the country's big mining companies. "We don't own stakes in Navoi, in Almalyk, in Navoiyuran, but we do have Uzbekistan Airways," Dan said.
Dan said the fund's next task was to float individual portfolio companies, six of which are named in a presidential decree. "We're starting to roll those IPOs out. So I think in 2027, I'm hoping that we will have two IPOs of our underlying portfolio companies," he said.
"It's still to be decided between us and the government whether we'll issue primary shares or whether there will be secondary or a combination of the two," Dan said. "The source of the secondary can be both the government and UzNIF as well. So we can also participate as a potential seller in the IPO to create liquidity at the fund level.”
Dan said a second fund was for the government to decide. "UzNIF 2, that's something for the government to decide if they're happy with the performance of UzNIF 1. And I think so far there are very strong reasons to be happy. But in terms of adding assets, there is no plan to add assets with government injecting stakes into the fund.”
"What we can do, of course, is we have full discretionary power over the portfolio. So we can make investments in new companies, but they have to be some very compelling investment cases. Right now, we're fully engaged in the effort to transform the underlying portfolio companies, so to improve the operational efficiency, governance, strength of the management teams, and to bring some of the underlying companies to the market.”
The model is already being exported: Mongolia signed a memorandum with Franklin Templeton in July to prepare its own state companies for listings and place them under a national investment fund.
Growth now, income from 2028
The legislation that set up the fund requires its portfolio companies to pay out at least 50% of annual profits as dividends, but Dan said investors should not expect payouts yet. "Investors should be looking at the fund as a NAV growth story, which will turn into an income story in the next two or three years as we do our job in the underlying portfolio companies," he said.
"From where we are today, the first dividends that will be paid to investors will be in the first half of 2028, which will be based on the underlying financial statements of the fund for 2027. So the dividends that we collect from all the companies throughout 2027, those are based on the results for 2026 effectively. So this is the key year that will set kind of a minimum benchmark for potential dividend payments from the underlying companies.”
Rules of the game
Rule of law, property rights and minority shareholder protection still matter more to foreign investors than any single deal, and Dan said the legal base was improving. "When you look at our governance rights, the minority shareholders rights in Uzbekistan, it's the legislative reform that has taken place over the last few years to give more power to minority shareholders, and then also the capital markets law, which is expected to be approved within the next, I guess, six to 12 months at the very latest, that will continue to strengthen the fundamentals of the local capital market," he said. "I think investors are incredibly optimistic about participating in the development of the local capital market in Uzbekistan.”
The other big change is the Tashkent International Financial Centre (TIFC), a separate jurisdiction operating on English common law principles that was established in July and is headed by the president's daughter, Saida Mirziyoyeva. It invites comparison with Kazakhstan's Astana International Financial Centre, but Dan said the Gulf was the closer model. "The TIFC is based on a lot of the financial centres around the world. But Abu Dhabi serves more of an example for TIFC. We're very excited to see how that develops as well," he said.
"For a lot of strategic investors, TIFC will play a very important role in being members of Tashkent International Financial Centre, having operations in Uzbekistan, but being under the English law of TIFC. So not necessarily on the capital market side. Obviously, it's part of it. But there are much broader implications of the potential impact of TIFC for the country.”