Fund of the week: high stakes and big rewards in Iraq

Björn Englund, 40, is no stranger to conflict. A former warrant officer, the Swede served as a UN peacekeeper in Lebanon and Kuwait more than 20 years ago. But now he’s got an even bigger fight on his hands. As manager of the $23.6m Iraqi-focused Babylon Fund, he’s trying to convince people that Iraq is a plausible long-term investment.

Launched in September 2006, 30% of the Babylon Fund is invested in bonds, including Iraqi sovereign debt. He lists the 5.8% coupon, maturing in 2028, as one of his favourites. The other 70% is in equities, half of which are foreign firms with significant operations in Iraq, including several oil groups.

But with trading volumes on the Iraqi stock exchange expected to rise by 150% next year as a new electronic trading system is installed, he expects to focus more on Iraq-listed stocks in the future, particularly Iraqi oil services and telecommunications firms. “There are three Iraqi mobile-phone licences, and in order to get one you have to list 25% of your shares on the market. It’s the best-performing sector in Iraq right now, because even the militants don’t want to take down the masts.”
Babylon Fund graph
So far this year, the fund is down 9.4% – not bad compared to the global markets’ performance. While trouble looms in the near future (“there are upcoming elections in six to eight months, so there could be a lot of targeted bombings”), he says the security situation has improved, with troop deaths and injuries down 90% on last year. The minimum investment is $100,000. Wealthy investors with a high appetite for risk who share Englund’s optimism on Iraq will be hard-pushed to find a purer play on the country.

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The Babylon Fund’s top ten holdings

Warka Bank
Qurain Holding
North Bank
Investment Bank of Iraq
Addax Petroleum
Iraqi Middle East Investment Bank
Bank of Baghdad
DNO AS
Commercial Bank of Iraq
Baghdad Soft Drinks