New Fund Will Invest In ‘Next 11,’ Including Iran

Aug 31 2010 | 5:28am ET

Castlestone Management is set to roll out a fund investing in 11 emerging and frontier markets, hoping to hit upon the next BRIC success story.

The US$350 million London-based firm will launch the fund in the beginning of October. The new vehicle is based on Goldman Sachs’ prediction that 11 countries are likely to follow in the footsteps of Brazil, Russia, India and China.

“It gives investors a second shot at a BRIC-like opportunity at a time when you’re not early in getting to the BRIC story anymore,” fund manager Arrash Zafari told Reuters.

The countries in the Next 11 Emerging Markets Fund “have the same fundamental drivers” as the BRIC countries: “very large populations that are often still growing and getting richer and whose spending power will be increasingly integrated with the global economy.”

The “Next 11” are Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philipines, South Korea, Turkey and Vietnam. The Castlestone fund will invest about 10% of its assets in South Korea and split 65% among Indonesia, Mexico, the Philippines and Turkey. Another 20% to 25% will be invested in Egypt, Nigeria, Pakistan and Vietnam, with 5% invested in the most frontier of the new emerging markets, Bangladesh and Iran.

Zafari brushed off risk concerns about some of his 11 countries, saying that Iran is a “jaw-dropping opportunity” that is “completely overlooked,” likely because of the country’s rogue status with the United Nations and U.S.

The Next 11 fund will be domiciled in the British Virgin Islands. According to Zafari, it has a capacity of about US$200 million.

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