New York (HedgeCo.net) – Illinois-based hedge fund, Global Capital Investments, has launched the Iraq Fund L.P. Managing directors Abraham Merchant and Kenneth Kuhn plan to invest primarily in listed equities of the Iraq Stock Exchange (ISX) and up to 20% of its assets in private, less liquid, early-stage investment opportunities that focus on Iraq’s infrastructure and natural resources.

“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,” Merchant said. “Interest rates have fallen from 20% to 6% annually, exports have risen, the dinar is stabilizing, and the country has minimal national debt.”

“The quality of corporate profits is rising and there’s economic and market support from the U.S. and internationally,” Kuhn added, citing a $3.6 billion in economic aid awarded to Iraq by the IMF in February 2010 and a $250 million award from the World Bank.

To put Iraq’s long-term growth potential in perspective, the stock markets of the Gulf Cooperation Council, a federation made up of six countries that neighbor Iraq, have market caps on average that are 70-100% of GDP. Iraq’s current market cap, by contrast, stands at $3.5 billion, or 3.5% of its $100 billion GDP. According to IMF estimates, Iraq’s GDP is expected to outpace its GCC neighbors in coming years.

That growth will be petroleum-based. Iraq, which ranked 13th among the world could become the 2nd largest producer, based on its expected and proven oil reserves. In 2009 the Iraq Government awarded rights to a number of international oil companies to develop 10 oil fields with the aim of boosting output to more than 12 million barrels per day within six years.

Alex Akesson
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