Babylon Fund Spirals Downward In 2008

Jan 27 2009 | 11:19am ET

The Iraq-focused Babylon Fund dropped another 3% last month, bringing its year-to-date loss to 22.7%.

While the fund’s performance was not satisfying from an absolute return perspective, portfolio manager Björn Englund said its performance relative to other Middle East and North Africa funds, and frontier markets funds, were actually “quite attractive.”

“An Iraqi market that almost everybody perceived wrongly as one of extreme high risk, turned out truly to provide a relative uncorrelated, and lowly financial risk environment,” wrote Englund, in a letter to investors. “During the year, Iraq has not endured a single corporate bankruptcy among its 100 publicly listed companies, even less any bursts of financial bubbles nor any recapitalization/nationalizations of the private banking system.”

Neither aggressive deleveraging or forced selling have been issues on the Baghdad trading floor, according to Englund. Rather, he says most of the Iraqi strategic shareholders are currently raising their stakes on the basis that Iraqi equities are clearly undervalued and will rebound from their current depressed levels.

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