Who is the big winner from the coming end of sanctions in Iran? If you guessed the US, Europe, one billion Sunni Muslims, innocent civilians in Yemen, Syria, Israel, Iraq, South America etc. or the Iranian people you guessed wrong!
The likely end of the international sanctions on Iran in the next few months has big business and financiers chomping at the bit to jump into that large and relatively untapped new market. That said, there are few ways to invest in Iran right now, but it looks like that is set to change by the end of the year.
An investment management firm based in London named Sturgeon Capital that specializes in frontier and emerging markets announced on Monday that it plans to launch a new fund to invest directly in Iran. Sturgeon’s Iran fund will be ready to accept investments by the end of September.
Details on new Sturgeon Capital Iran fund
Sturgeon’s new long-biased Iran equities fund plans to invest in consumer companies in pharmaceuticals, consumer discretionary and banking sectors, says Clemente Cappello, the firm’s CEO, according to a report from Hema Parmar of Bloomberg News. It plans to buy the equity of a small Iranian bank that only provides loans to corporations, according to Cappello, who declined to identify the bank.
Interest in Iran as a new place to invest has grown out of a decade plus of experience investing in the Caspian region, Cappello noted. “We were always interested in Iran. We visited companies and the stock exchange for the first time in 2012 and have been following it closely since.”
The lifting of international sanctions against Iran would be a “game changer,” Cappello pointed out. He says Iran “is going to possibly play a completely different role in the U.S. It has a chance of becoming closely allied in the West.”
Of note, the new Iran Fund might begin trading in August with internal capital. It is being launched in partnership with Iranian Mofid Securities.
Sturgeon Capital is looking to raise $20 million and $30 million for the fund, which will be “compliant with sanctions but also Western best practices,” according to a draft of the marketing materials. The documents note the fund will invest in large firms on the Tehran Stock Exchange not currently subject to international sanctions and some private firms. Cappello says non-sanctioned companies represent around one third of the listings on the Tehran exchange.
Current valuations of Iranian firms “are rock bottom at five times P/E and double digit dividend yields,” according to Sturgeon’s marketing materials. “It’s not about what the company looks like now,” Cappello explained. “But rather, where can the management and the market take this company. So that’s why we have a more of a growth approach on this.”