US-based Global Capital Partners has launched a fund for investment in equities listed on the Iraq Stock Exchange (ISX) and early-stage projects.

The Iraq Fund will invest primarily in ISX equities and up to 20 per cent of its assets in private, less liquid, early-stage investment opportunities that focus on the country’s infrastructure and natural resources.

Global Capital Partners says the recent trends in Iraq make the oil-rich country a compelling investment opportunity.

“As Iraq’s economy transitions, it is in the process of adopting legal and regulatory reforms that will make its financial markets more attractive to outside investors,” said Abraham Merchant, one of the managing directors of Global Capital Investments, the general partner of the Iraq Fund, which launched on 2 November.  

Interest rates have fallen from 20 per cent to 6 per cent annually, exports have risen, the dinar is stabilising, and the country has minimal national debt, says the investment firm.

“As Iraq’s economy strengthens, inflation becomes more manageable and the economy expands, currency appreciation will result in the appreciation of all Iraqi capital investments,” said Merchant.

The GCC stock markets’ capitalisation are on average 70-100 per cent of gross domestic product (GDP). By contrast, Iraq’s current market capitalisation stands at $3.5bn, or 3.5 per cent of its $100bn GDP.

“The quality of corporate profits is rising and there’s economic and market support from the US and internationally,” says Kenneth Kuhn, managing director, citing a $3.6bn in economic aid awarded to Iraq by the International Monetary Fund (IMF) in February 2010 and a $250m award from the World Bank.  

On 3 October, Abu Dhabi’s Invest AD launched an Iraq Investment Fund to capitalise on its strong future economic growth, estimated at more than 7 per cent annually in the next couple of years, according to the IMF.

The new fund, which is open to institutional and high net-worth investors, will make investments primarily in listed equities, but also in unlisted opportunities.

Iraq’s increased oil production is expected to be the key driver of growth in the coming years. It has the world’s third-largest proven oil reserves and the country has signed 11 oil field development deals with international majors, including Holland’s Royal Dutch Shell, the US’ Exxon Mobil and South Korea’s Kogas.

These deals are projected to lift the country’s crude capacity within seven years to just under Saudi Arabian levels of 12 million barrels a day (b/d), from its current 2.5 million b/d.