Englund Preps Second Iraq Hedge Fund

Sep 6 2007 | 1:15pm ET

Björn Englund is going back to Babylon. The Iraq-focused hedge fund manager is prepping a second hedge fund to invest fully in the Iraqi Stock Exchange after making his first foray into the region last year. 

Englund is currently marketing the Babylon Core Fund, which is slated to launch in three to four months, as a subfund of the existing Babylon Fund.

As opposed to his current fund, which has a 25% allocation to the Iraqi Stock Exchange, Englund’s new offering will invest 100% in the exchange.

“We now see that more of our investors really understand the deep value that exists in the stock exchange and they want us to make bigger bets on this extremely cheap market,” said Englund.  

He also plans to boost his current fund’s Iraq exposure to about 50% over the next several months, depending on the liquidity of the market. Investors have already committed $3 million to the Babylon Core Fund, but Englund wants to launch with $5 million and is currently hitting the pavement for additional capital.

“It’s almost laughable from a New York perspective. However, size is not the most important thing at this point in time. We want to make a good product that is stable and secure,” he said. 

Englund is excited about the opportunities that lie within the Iraqi stock market, not just because his flagship $11 million Babylon Fund is up some 13% through August, but  he is also anticipating increased foreign investments and the switch over to an electronic format.

“The big thing has been that prices rose in June and July because starting in August foreign investors are fully allowed to buy into the Iraq Stock Exchange. Foreign investors accounted for about 9% of all contracts made in the exchange in late August and I expect that number to rise to about 20% in one or two months’ time,” he said.

“We’re also waiting for the computerization of the stock market because at this point in time it’s mainly white board trading. They’re talking about implementing the new system in October, so that would be a big boost and people would be able to follow what’s happening in the stock market more easily.”

However, he cautiously added, “There are no certainties in Iraq and in Baghdad.”

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