Iran is a winner among Mena regional woes

Mar 29, 2011

Turquoise Partners’ Iran Fund, along with the wider Tehran market, is performing well amid turmoil in the Mena markets. The firm also says it will open in Iraq.

Iran has forged ahead well while other stock exchanges in the Middle East and North Africa (Mena) have been hurt this year due to social and political turmoil.

Foreigners can invest in stocks listed on the Tehran Stock Exchange. Iran is included in Goldman Sachs' list of ‘Next 11 Countries’ and that list also includes Bangladesh, Egypt, Indonesia, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam.

Tehran’s stock market is up 16% this year in local currency terms, and 14% in US dollar terms. The market has reacted well to the recent elimination of petrol and electricity subsidies.

Turquoise Partners runs the $150 million Turquoise Iran Equity Investments Fund. It was established in June 2009, and was up 10.8% in 2009, 33% in 2010, and so far this year is up 8%.

The fund has quarterly liquidity and management/performance fees of 2% and 20% respectively. The fund is denominated in euro and Europe is the predominant location of the fund’s investors. A domestic Iranian rial version of the fund was launched last July.

Marketing director Eddie Kerman, who is based in Singapore, told AsianInvestor that the fund is performing lower than the Tehran index as they have taken a conservative approach to their portfolio construction this year. For example, they do not favour Iran’s automotive sector, which has in fact been a strong performer this year.

“We’ve taken a more cautious view about how the market would react to the subsidy removal plan,” says Kerman. “We favour pharmaceuticals, metals and financial services stocks, for example, private banking, where earnings are rising annually by 50%.”

Ramin Rabii is the Iran-based portfolio manager, and day-to-day management of the business is conducted from Tehran. He previously worked at Tehran-based Atieh Bahar Consulting, advising clients on their foreign investment strategy in Iran.

Iran is emerging from a closed economic model to a more open form in which a programme of privatisation is upcoming, with $105 billion of privatisations due in the next six to eight years.

The Turquoise fund concentrates on Iran’s 80 most liquid stocks, and generally these are the country’s largest capitalised stocks. Next step for the firm, according to Kerman, is to inaugurate an office in Iraq.