The FMG Iraq Fund continues to outperform world stock markets. The fund was up some +2.0% in the month of August and it has risen by +25% since its launch in May 2010. The current size of the fund is now $20 million under management.
FMG offers a retail share class for a minimum investment in the three share classes of US $10,000, (CHF) Swiss Francs 9,000 or GBP Sterling £6,000. Investment into the Iraq Fund is an attractive proposition for UK investors, as gains will be taxed as capital gains at 28% and not as income tax rate at 50% as the fund has H.M. Revenue & Customs “Reporting Status”.
Henrik Kahm, fund manager of the Iraq Fund, said: “FMG’s Iraq fund is sensibly positioned to benefit from the Iraqi growth story and fuelled by a growing confidence in the country’s stability”.
Iraq has the third largest oil reserves in the world. The country is one of the least explored in the region and oil experts say the country probably has 200-300 bn bbl of oil i.e. at par with Saudi Arabia. Iraqi oil is easy to access and costs only a few dollars per barrel to extract. The Iraqi government signed 11 oil contracts in 2009 with IOCs such as SINOPEC, Petronas, Shell, Exxon, ENI, Sonagol with the aim to explore and develop oil fields. Over 90% of oil revenues go to the Iraqi government, one of the highest royalty rates in the world. Value of the oil in the ground can be estimated to $10 trillion. World market capitalization is around $50 trillion. Iraq Stock Exchange market capitalization is $4bn. FMG thinks this is the most undervalued stock market in the world.
The proceeds from oil will be used by the Iraqi government to improve infrastructure and other related projects. FMG’s Iraq fund is carefully positioned to benefit from that new money coming into government and consumer spending, with exposure to a diverse range of Iraqi quoted stocks.
The amount of new foreign investment deals is on track to double this year, according to a report by Dunia Frontier Consultants. In just the first half of this year, Iraq attracted $45.6 billion in foreign investment, $3 billion greater than the total for the whole of 2010. On the macro side FMG has noticed that Iraq’s oil revenues surged by 62 percent to $41.3bn in the first six months of 2011 compared with $25.4bn in the first half of 2010, according to a report published by Arab Oil and Gas. The massive revenue increase was attributed to both higher oil prices and a significant increase in volumes.