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.”
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
Investment Bank of Iraq
Iraqi Middle East Investment Bank
Bank of Baghdad
Commercial Bank of Iraq
Baghdad Soft Drinks