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March 2019 investment update

Markets have rallied despite what appears to be the largest economic deceleration in recent years. How long will markets ignore the fact that corporate revenue, earnings and margin forecasts are deteriorating? It seems as if risk markets once again see bad news as good news, writes Dolfin’s Head of Investment Management, Richard Gray.

A ship-shape investment

Shipping doesn’t receive the same hype and attention as electric cars and space travel, but this essential industry is upping its game, with investments in carbon neutral ships and even autonomous freight carriers.

Dolfin completes acquisition of FPW, taking client assets to more than $3bn

We are delighted to announce that we have completed our acquisition of the business of London-based Falcon Private Wealth Ltd.

Postcard from Iran

There are so many reasons to consider investing in Iran, a highly populated country bursting with natural resources, up-and-coming technology firms and a large, consumption-minded middle class, writes Amir Nabi.

16 January 2017 / Macro & Markets
Author
Dolfin

For investors desperate for returns in a low-yield world, Iran offers a multiplicity of rewards – so long as you know where to look. It has the world’s fourth largest oil reserves, and the second largest stores of gas. Despite being pinioned by US-led sanctions for nearly four decades, it boasts the world’s 18th largest economy, worth around $400bn, and the 26th largest consumer market. It’s also an overwhelmingly young nation. More than 60% of its 80 million citizens are under the age of 35, with many keen to learn, save, spend – and build a better life.

In August 2016, I travelled to Iran for a holiday, visiting family and attending a wedding. I return often to the country of my birth, but this time I was amazed by the speed of change. New roads are being laid; gleaming office and residential blocks are springing up. Tehran’s international airport, a hive of activity, is set to process 30 million passengers a year by 2020, from 8 million at present. And the mood has changed. People are more confident and outgoing – they are enjoying life, and there is a buzz around the place that I had rarely seen in recent times. Some parts of the capital are virtually unrecognisable from a few years ago.

Money talks

There are challenges to investing in Iran. There are geopolitical tensions in the region, financing issues in the banking system remain a hurdle and there is a risk of snap back of the sanctions. However, outsiders are starting to invest regardless of the remaining US sanctions. French carmakers PSA Group and Renault are breaking ground on new joint ventures, or reviving old alliances. In the past few weeks alone, Royal Dutch Shell signed an agreement to explore for gas and oil whilst Boeing and Airbus are finalising their $16.6bn and $25bn deals respectively to sell new aircrafts to national carrier Iran Air. Miners from Toronto to London to Sydney covet the vast reserves of zinc (reckoned to be the world’s largest), copper, lead, uranium, and coal. Other industries, such as chemicals, have the potential to become global leaders.

Iran also has the long-term potential to become the focal point for the Middle East’s technology and fintech sectors. Local versions of Uber and Groupon are flourishing. During my last trip, I visited the offices of Digikala, founded in 2006 and Iran’s answer to Amazon, which offers next-day delivery of everything from smartphones to sofas to 20 cities nationwide. Another rising star is Café Bazaar, a privately owned firm that offers more than 25,000 downloadable apps targeted at speakers of Farsi.

 

How to invest

Investing in Iran is easier than you think. Assuming you are not a multinational looking to deploy billions of dollars, there are three basic ways in. The first is via private equity. A host of funds, many based in London or Geneva, are channelling global institutional capital into local ventures – a prime example being Griffon Capital’s Iran Flagship Fund. Tailored industry funds are springing up, focusing on the hotel sector or the telecom space, with UK-based Iratel Ventures raising $10m to invest in mobile start-ups.

The second route in is via funds that aim to leverage the huge potential of Tehran’s Stock Exchange (TSE), which processes $2bn in trades daily. Charlemagne Capital’s Turquoise Variable Capital Investment Fund, which has a minimum investment requirement of $125,000, invests directly in the shares of around 25 local sanctions-compliant firms. Turquoise also runs a successful exchange-traded fund, the TSE 30 Iran Index ETF, which tracks the 30 largest firms on Tehran’s main board. It was up 27% through the first 11 months of 2016, tracking the TSE, which gained 30%. Analysts tip the TSE to be one of the emerging world’s best-performing markets over the next 10 years.

Go direct

Finally, there’s the direct route. Foreign investors can own 100% of a local venture, while Iran offers tax incentives and, at 25% and 9% respectively, enticingly low rates of corporate and value-added tax. But it’s riskier. The legal system is a work in progress, while all share trading has to be settled by the Central Securities Depository of Iran. And while American sanctions are slowly being lifted – a process that’s unlikely to stall, despite Donald Trump’s surprise win in the 2016 US presidential election – breaching them can incur a hefty fine. For investors keen to invest in Iran, sage advice from professionals with local knowledge is worth its weight in gold. The government is currently extending tax exemption on all inward foreign direct investments for a period of ten years, and investors are entitled to repatriate capital and revenue to foreign bank accounts.

Overall there is little to fear and much to like about Iran. This is a fast-growing frontier market set to expand by around 8% a year over the next decade. It’s filled with young, well-educated people desperate to learn, spend, invest, and engage with the global economy. My recent trip to my homeland taught me that Iran is ready to be a powerhouse again. It’s hard to think of any emerging market with greater promise and more long-term potential. The direction of change is unmistakeable.

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