For Grant Felgenhauer, a money manager whose hedge fund owns $110 million of Iraqi equities, the 15 explosions that rocked the country on a single day in mid-January weren’t a reason to stop buying. “The Iraq that is unfolding in Baghdad is not the Iraq you read about in the headlines,” says Felgenhauer, a portfolio manager at Euphrates Iraq Fund. Felgenhauer, who previously traded Russian stocks at Bill Browder’s Hermitage Capital Management in Moscow, last year earned a return of 28 percent on his Iraq holdings, according to data compiled by Bloomberg, with bets on Bank of Baghdad, the country’s biggest commercial lender, as well as Baghdad Soft Drinks and Al-Mamoura Co. for Real Estate Investment.
That performance, compared with a 9.5 percent decline for Iraq’s ISX General Index, helped make New York-based Euphrates the fourth-best-performing emerging-market fund managing more than $50 million in 2013, outpacing gains at far bigger rivals such as asset manager BlackRock (BLK).
Iraq’s economy is expected to expand 6.3 percent this year, up from 3.7 percent in 2013, the International Monetary Fund forecast in October. The Iraqi government estimates oil production will rise to 9 million barrels a day by 2020, compared with about 3.4 million a day in January. “No other country has this growth trajectory,” says Felgenhauer, who spends a week in Baghdad every quarter.
“The scale of the increase in oil production expected from Iraq has only happened twice in history: once in Saudi Arabia in the 1960s, and in Russia in the 1990s. Both episodes transformed the local banks and equity markets.” The Iraq benchmark index has dropped just one point during the emerging-market selloff that began in January.
Read full article on Bloomberg http://www.businessweek.com/articles/2014-02-13/iraqi-growth-attracts-emerging-market-investors