Interests in Iran’s capital market have been growing following the nuclear milestone reached between Iran and P5+1 in Vienna which will lift economic sanctions against Iran in exchange for limitations on its nuclear energy program.
Institutional investors are lining up to get a slice of Iran’s fast emerging market, with many of them having already found partners and registered companies or gauging the country’s potential to map out their strategies.
A number of European institutional investors are considering establishing specialized or mix-asset funds, gathering information on large-cap companies listed at Iran’s stock exchanges or studying non-listed companies to hunt suitable candidates for mergers and acquisitions.
Financial Tribune had an exclusive interview with Clemente Cappello, founder and CEO of London-based investment manager Sturgeon Capital, on what is attracting the institutional investors to Iran.
Sturgeon Capital is an independent asset manager focused on the frontier and emerging markets of Central Asia. The firm invests across the capital structure, including public equity, private equity, fixed income and debt securities. Iran’s tremendous opportunities are the latest to pique the company’s interest.
Bloomberg earlier reported that Sturgeon Capital is seeking to raise between $20 million and $30 million for a Bermuda-domiciled fund by the end of this year to invest directly in Iran’s equity market.
The equity-focused fund will invest in Iran’s consumer-facing companies including pharmaceuticals, banks and consumer goods, Cappello said. “It will be compliant with sanctions but also western best practices.”
But what triggered the company to consider investing in Iran?
“Iran is a huge market that has been closed to foreign investors for a long time,” said Cappello in response.
“We have been investing around the Caspian region for almost 10 years now, and it was a natural step for us to look at Iran as the political tensions are taming,” he added.
Apart from rich natural resources, Iran has many features to attract foreign investors, among which Cappello referred to its highly educated and competitive labor force.
“Human capital is Iran’s real natural resource. With its highly educated labor force, Iran could become a major manufacturing hub like China and even overtake China in production of high value added products.”
The fund is a way to give foreign investors a chance to invest in the Iranian stock market as one of the most interesting of its kind in the world, said Cappelo, adding that it will be launched in partnership with Mofid Securities that “will help us in offering the best research to our investors, select the best companies and have the fund grow.”
Sturgeon Capital says is looking at companies that have been consistently well-managed over the past years and have the best chance for growth in the coming years.
“Companies with competent management that are capable of supplying quality products in the long run in the consumer, technology, pharmaceutical and financial sectors are the best candidates for investment,” he said.
“We are looking at pre-acquisitions. We see a lot of opportunities for Iranian companies, especially in boosting exports to neighboring countries.”
Cappello also said his company will be looking for smaller companies with potential for growth rather than very large companies that have to satisfy different objectives.
