"Never invest unless there is blood on the streets," runs the maxim from Jacob Rothschild that adorns the cover of the sales presentation from First Persian Equity Fund. Investors in the €300 million three-year closed fund, launched on June 15 and closing at the end of July, will presumably have scented blood on the fledgling Tehran Stock Exchange where years of political turmoil have kept valuations low. Volumes on the TSE have more than doubled in the past three months, while the forecast P/E ratio of five for 2007 is less than half that of Iran’s neighbours.
The fund is managed by a Cayman-registered subsidiary of the state-owned Bank Melli’s investment arm, BMIIC, and will invest in government debt, listed equities and pre-IPO opportunities. These will largely come from the impending wave of privatization following the government’s commitment to reduce its involvement in the public sector to 20%. Potential investors might identify a possible conflict of interest in a state-owned vehicle investing in the privatizations of state assets but the appropriate controls are in place, according to Stephen Austen, managing director.
"Government ownership is something of a two edged-sword," he says. "It is nice to invest with the backing of the country’s foremost financial institution, with all its years of experience in investing in Iran, but yes, this is ultimately a state vehicle.