When Clemente Cappello traveled across Iran in May 2012, the U.S. and European Union had just expanded sanctions against the nation in an effort to push President Mahmoud Ahmadinejad to curtail its nuclear program.
Just over three years later, the 35-year-old hedge fund manager wants to invest in the country.
Sturgeon Capital, which is based in London and oversees $80 million in frontier and emerging markets, is seeking to raise a fund to invest directly in Iran, which could emerge from international sanctions under terms of a nuclear agreement reached in Vienna last week.
The potential removal would be a “game changer,” said Cappello, who set up Sturgeon in 2005 primarily to invest in Central Asia. It means “you’re someone we can do business with,” he said. The fund could be as much as $30 million by the end of this year and may start investing as early as August.
The potential removal of sanctions could open up Iran’s $100 billion stock market and benefit companies that do business within the country, Jan Dehn, head of research for Ashmore Group, wrote in a July 20 research note.
“It will still be some time before foreign investors can fully and directly participate in the Iranian stock market, but our expectation is that Tehran will soon start moves to open its markets to foreign investors,” Dehn wrote.
Sturgeon has considered expanding into Iran, which has abundant natural resources and highly educated skilled cheap labor, for some time, said Cappello.
The equity focused fund will invest in Iran’s consumer-facing companies including pharmaceuticals, banks and consumer discretionary, Cappello said. It will be domiciled in Bermuda and be “compliant with sanctions but also Western best practices,” according to marketing materials.
It will invest in large companies on the Tehran Stock Exchange that aren’t subject to international sanctions, which Cappello said make up about one-third of the listings, as well as private companies.
“It’s not about what the company looks like now,” Cappello said,“but rather, where can the management and the market take this company. So that’s why we have a more of a growth approach on this.”
The fund is being done in partnership with Iranian brokerage Mofid Securities.