Fund managers begin to take Iraqi investment gamble

[k98nights]

Fund managers begin to take Iraqi investment gamble

Friday, 4 June 2010 at 14:01, Reuters, Mumbai/London

A few bold fund managers are betting on the reconstruction of war-ravaged Iraq to tap into a market potentially worth billion of dollars.

They are seeking out hedge funds, family offices, ultra high net worth investors and pension funds as potential investors willing to overlook the volatility for the prospect of double-digit returns from the Middle Eastern country.

"We strongly believe that the Iraqi stock exchange is a one-way bet," said Eric le Blan, chief operating officer at boutique investment firm MerchantBridge.

The firm launched the Iraq-focused Mesopotamia Fund last month, aiming to initially raise $5 million, and $50 million in the long term. So far, it has attracted only Middle Eastern investors, but it hopes Western clients will follow.

Iraq's stock market is valued at about $2.5 billion with nearly 90 listed stocks, almost untouched by foreign portfolio investors. Some of its blue chips are North Bank, Credit Bank of Iraq and hospitality group Mansour Hotel.

An inconclusive election has left political tensions in Iraq high, with no new government in sight nearly three months after the vote.

The country remains largely isolated from world financial markets - only a short while ago local banks were so cut off the only way to transfer money across borders was in cash-stuffed bags.

But substantial investments from groups such as Exxon Mobiland Royal Dutch Shell to develop untapped oil fields are expected to boost capacity, bringing a return of prosperity and lifting consumption.

The government is also set to finance the construction of a $3 billion metro rail through Baghdad to shore up depleted infrastructure after years of war and underinvestment.

HIGH RISK, HIGH RETURN

Despite the potential, risks still abound and money managers warn that in this gamble of high risk and reward, losing a major chunk of money is a real possibility.

"We are telling everybody: put in 1-3 per cent of your assets, write it off immediately as a total loss and then look at it in three to five years," said Johan G. Kahm, a principal at multi-manager fund firm FMG that manages about $200 million across 10 funds.

Kahm said his $5 million special opportunities fund is now investing only in Iraq and raising money to boost assets to $10-15 million.

"Iraq is a long-term play, the minimum investment horizon is at least one year," le Blan said.

However Bjorn Englund, founder of alternative fund manager Godvig, said the while economic development will materialise "with a lag", the risk involved "is lower than perceived, which gives a very good risk/return potential".

Godvig's Babylon Fund returned a total of 25 per cent since its inception and the fund's assets have grown four-fold to $21 million since inception.

Sitting on about 115 billion barrels of oil reserves, Iraq could look completely different five years down the line, as oil production and investment flows improve and the country's economy gets a lift, re-rating its stock market which is valued lower than that of Barbados.

"Nobody knows what's going to happen. Everybody is guessing. But if it works out, we are going to make five, 10, 20 times of our money," Kahm said.

http://english.alrroya.com/content/fund-managers-begin-take-iraqi-investment-gamble

[aszone]

Fund managers begin to take Iraqi investment gamble

Friday, 4 June 2010 at 14:01, Reuters, Mumbai/London

A few bold fund managers are betting on the reconstruction of war-ravaged Iraq to tap into a market potentially worth billion of dollars.

They are seeking out hedge funds, family offices, ultra high net worth investors and pension funds as potential investors willing to overlook the volatility for the prospect of double-digit returns from the Middle Eastern country.

"We strongly believe that the Iraqi stock exchange is a one-way bet," said Eric le Blan, chief operating officer at boutique investment firm MerchantBridge.

The firm launched the Iraq-focused Mesopotamia Fund last month, aiming to initially raise $5 million, and $50 million in the long term. So far, it has attracted only Middle Eastern investors, but it hopes Western clients will follow.

Iraq's stock market is valued at about $2.5 billion with nearly 90 listed stocks, almost untouched by foreign portfolio investors. Some of its blue chips are North Bank, Credit Bank of Iraq and hospitality group Mansour Hotel.

An inconclusive election has left political tensions in Iraq high, with no new government in sight nearly three months after the vote.

The country remains largely isolated from world financial markets - only a short while ago local banks were so cut off the only way to transfer money across borders was in cash-stuffed bags.

But substantial investments from groups such as Exxon Mobiland Royal Dutch Shell to develop untapped oil fields are expected to boost capacity, bringing a return of prosperity and lifting consumption.

The government is also set to finance the construction of a $3 billion metro rail through Baghdad to shore up depleted infrastructure after years of war and underinvestment.

HIGH RISK, HIGH RETURN

Despite the potential, risks still abound and money managers warn that in this gamble of high risk and reward, losing a major chunk of money is a real possibility.

"We are telling everybody: put in 1-3 per cent of your assets, write it off immediately as a total loss and then look at it in three to five years," said Johan G. Kahm, a principal at multi-manager fund firm FMG that manages about $200 million across 10 funds.

Kahm said his $5 million special opportunities fund is now investing only in Iraq and raising money to boost assets to $10-15 million.

"Iraq is a long-term play, the minimum investment horizon is at least one year," le Blan said.

However Bjorn Englund, founder of alternative fund manager Godvig, said the while economic development will materialise "with a lag", the risk involved "is lower than perceived, which gives a very good risk/return potential".

Godvig's Babylon Fund returned a total of 25 per cent since its inception and the fund's assets have grown four-fold to $21 million since inception.

Sitting on about 115 billion barrels of oil reserves, Iraq could look completely different five years down the line, as oil production and investment flows improve and the country's economy gets a lift, re-rating its stock market which is valued lower than that of Barbados.

"Nobody knows what's going to happen. Everybody is guessing. But if it works out, we are going to make five, 10, 20 times of our money," Kahm said.

http://english.alrroya.com/content/fund-managers-begin-take-iraqi-investment-gamble

"Iraq is a long-term play, the minimum investment horizon is at least one year,"

"We are telling everybody: put in 1-3 per cent of your assets, write it off immediately as a total loss and then look at it in three to five years"

"Nobody knows what's going to happen. Everybody is guessing. But if it works out, we are going to make five, 10, 20 times of our money,"

Makes you wonder if we are all just dreaming of turning 1k+ investment into hundreds of thousand or millions...

[GoBap2010]

"Iraq is a long-term play, the minimum investment horizon is at least one year,"

"We are telling everybody: put in 1-3 per cent of your assets, write it off immediately as a total loss and then look at it in three to five years"

"Nobody knows what's going to happen. Everybody is guessing. But if it works out, we are going to make five, 10, 20 times of our money,"

Makes you wonder if we are all just dreaming of turning 1k+ investment into hundreds of thousand or millions...

Sorry I did not add my text. I have stayed off the site just because of such thoughts. One day the Dinar is going to RV, then in 30 days and then by the end of the year. I just will continue to check periodically and hold my breath. I feel my investment is a sure deal but when I will not continue to ride the roller coster. I will enjoy this blessing when God says so, no sooner and no later. You all stay blessed and wise.

[Cabletech911]

Iraqi Babylon Hedge Fund Q1 Report

New York (HedgeCo.net) – The high risk Iraqi Babylon Fund reported its Q1 resullts, showing a modest loss of 2.8% in the hedge fund’s price over the three-month period. In the same period the Iraqi stock market lost -7% in the wake of postelection jitters and rumours, the hedge fund said in its Fact Sheet for March 2010.

“No Iraqi banks have closed their doors last few years (compared to hundreds in the US), a larger, stronger, even more trustworthy private bank system is a core necessity to grow confidence further among the Iraqi public – a country that only five years ago was a dictatorial socialistic planning economy.” Bob Torkelund, Director at the Babylon Fund, said, “We expect that at least one bank out of five will struggle to reach the minimum threshold in time.”

The Babylon Fund is an open-ended investment fund investing into relatively large-cap Iraqi-dependant securities, mainly listed on the Iraqi stock exchange in Baghdad. The investment process is mainly top-down driven.

“During the month we trimmed our position in the oil company DNO further, sold out large parts of our 5.8% 2028 Iraqi bonds, rotating into existing Iraqi banks, buying on dips. Thereby our equity exposure was raised further, on the expense of cash and bond allocations. These moves reflect our view that present market weakness and wait-and-see stance among investors should be regarded as good timing for searching for buying opportunities.” Torkelund concluded.

Alex Akesson

Editor for

HedgeCo.net

http://www.hedgeco.net/news/04/2010/...q1-report.html