Heads will more than likely roll over in Dallas when David Lear and his Halliburton cronies find out they didn’t come up with this genius money-making scheme first: the Babylon Fund, a hedge fund that invests 50% of its money directly in Iraq and the other 50% in Iraq by-way-of Halliburton-esque companies. The fund was launched in September with US$8 million in assets by Godvig Capital, an asset management firm run by Björn Englund who, for what its worth, bears an interesting resemblance to Lex Luthor. It is domiciled in the Virgin Islands, and managed from Godvig’s Luxembourg HQs and a Baghdad office.
It’s also aiming for the sort of returns hedge funds used to make routinely. “Over a business cycle…let’s say five to seven years, I would be disappointed if I didn’t get a 30% return per year,” Englund says, adding that to do that, you have to be in Baghdad.
Foreign investors are not yet allowed to trade on the two-and-a-half-year-old Iraq Stock Exchange—“They have said, ‘within six months,’ for the last two-and-a-half-years,” Englund laments, though he adds optimistically, “there is a possibility it will happen by the end of the year, but nobody really knows”—so you need locals on the ground.
While Englund is hopeful about making returns in spite of violence, corruption, illiquid markets and a potential drop in oil prices, he is admittedly “fantastically disappointed” in not having any money from American investors. Nonetheless, he believes that the “Iraqi financial markets will turn the corner” and that Saddam’s execution will not have an impact on the market. The one hobgoblin of the operation may be that Englund includes casualty figures in the appendix of his prospectus, but once you get over that it’ll be smooth sailing.
Bridges To Babylon: New Fund Focuses On Iraq [FINalternatives]