Bermuda-domiciled FMG Iraq fund set to reap the benefits of investment in infrastructure in this frontier investment market.
The FMG Iraq Fund is positioned to benefit from the Iraqi growth story, which has seen an increase in new foreign investment deals. According to a report by Dunia Frontier Consultants the amount of new foreign investment deals is on track to double in 2011. In just the first half of this year, Iraq attracted $45.6bn in foreign investment, $3bn greater than the total for the whole of 2010.
Since launch in May 2010, the fund has risen by 25%. The current size of the fund is now $20m.
Underpinning growth opportunties is the fact that Iraq has the third largest oil reserves in the world. According to FMG, the country is one of the least explored in the region and oil experts say the country probably has 200-300 billion barrels of oil, which puts it at par with Saudi Arabia.
Henrik Kahm, fund manager of the Iraq Fund, said: "The proceeds from oil will be used by the Iraqi government to improve infrastructure and other related projects. FMG’s Iraq fund is carefully positioned to benefit from that new money coming into government and consumer spending, with exposure to a diverse range of Iraqi quoted stocks”.
According to FMG, Iraqi oil is easy to access and costs only a few dollars per barrel to extract. In 2009, the Iraqi government signed 11 oil contracts with companies such as SINOPEC, Petronas, Shell and Exxon with the aim to explore and develop oil fields. Over 90% of oil revenues go to the Iraqi government, one of the highest royalty rates in the world. Value of the oil in the ground can be estimated to $10 trn. World market capitalization is around $50 trn. Iraq Stock Exchange market capitalization is $4bn, which makes it one of the most undervalued stock markets in the world, says FMG.
FMG offers a retail share class and the minimum investment in the three share classes of US $10,000, (CHF) Swiss Francs 9,000 or GBP Sterling £6,000. Investment into the Iraq Fund is an attractive proposition for UK investors, as gains will be taxed as capital gains at 28% and not as income tax rate at 50% as the fund has H.M. Revenue & Customs “Reporting Status”. The fund has a load fee of 5%, base fee of 2% and a high water mark performance fee of 20%.
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