Gains Gleaned from High-Risk Iraq Investments

Investing in a financial environment where widespread corruption, bureaucratic red tape, daily civilian violence, and a constant threat of full-scale civil war among warring religious groups are the order of the day has paid off for many high-risk hedge investment funds in Iraq. 
 
However, a recent decline in violence and a recovery in Iraqi oil output have offered a a positive light in an otherwise uncertain investment climate. 
 
Five hedge funds that invest directly in Iraqi companies or buy substantial stakes in foreign firms that do a lot of business in Iraq gained an average of 25% in 2007 through the end of November, the most-recent monthly data available, says Hedge Fund Research Inc.  
 
That average gain beats the 14% return seen by funds investing in the wider Middle East and other emerging markets over the same 11 months, according to Hedge Fund Research. The gain is in sharp contrast from the same period in 2006, when the same five funds were down 3.2% in the face of a potential civil war in Iraq. 
 
One company posting gains is Luxembourg-based Godvig Capital Management's Babylon Fund, which invests in Iraqi companies and bonds and firms doing business in Iraq, doubled in size in 2007 to $14.8 million after posting returns of 25.1%. Those results followed a 2.4% rise in 2006 in the four months after the fund was launched. 

Published on January 15, 2008