Many would think there would be little future for Iraq. But Kenneth Kuhn thinks that there is greater business to be done here than in any other place. The Chicago hedge fund manager wants to prove this by launching a new hedge fund focusing on Iraq, through which he aims to provide better access to Iraq’s financial markets. He believes that the country can deliver promising returns to investors.
Over the years, Iraq has been recovering slowly from its war-torn state after the US-led coalition force invasion in 2003.
What was left for the country was nothing but damaged infrastructures and millions of its residents locally displaced. Reconstruction efforts implemented both internationally and locally are still not enough to relieve the country of its current state.
Kuhn, together with one of his colleagues, Abraham Merchant, recently launched The Iraqi Fund and they have already raised $5 million for investment in Iraq. Kuhn also aims to raise an additional $5 million, and thus joining other funds focusing on doing business in Iraq, such as FMG’s Iraq special opportunity fund, Godvig’s Babylon Fund, and Merchant Bridge’s Mesopotamia Fund.
While some may say Kuhn’s fund is small, that is not the case, as the Iraqi stock market has a total market capitalization of some 3 billion dollars. His hedge fund has already made a selection of 44 stocks on the Iraq Stock Exchange – out of 93. The selected stocks are traded for amounts ranging from below one cent to 19 cents per share.
This year, security incidents in Iraq dropped significantly and the new government seems to be doing well. When asked where foreign investors should start, Kuhn says that oil and oil services are the top choices as Iraq’s economy is vastly dominated by the oil sector and it has provided 95% of the country’s foreign exchange earnings. With proper investment, analysts also believe in Iraq’s potential to be the second biggest oil producer in the world in the coming years, owing primarily to the quality of its oil reserves. Also, its quantities of oil reserves also rank it as one of the world’s largest, making it ideally the first in line to be invested upon.
Another great opportunity for investment is the agricultural industry, which is backed up by two major rivers that run through Iraq, the Tigris and Euphrates, providing Iraq an agriculturally-capable land. Last but not the least is the tourism industry, which Kuhn believes it could benefit from several Muslim pilgrimage sites dotting the country.
Despite the financial crisis and risks involved, Kuhn believes in the long term recovery of Iraq and hopes to see strong returns in the years to come. He also believes that, as people realized that risks are present everywhere, they are considering turning those risks to their advantage.
