Iran, Iraq to Set Up Joint Investment Fund

EghtesadOnline: Securities and Exchange Organization of Iran and the Iraqi Securities Commission signed a memorandum of understanding to create a joint investment fund.

News ID: ۷۴۸۰۳۷

31 July 2019

The fund will be based on master-feeder fund model, according to the SEO News Agency.

The MoU was signed in Tehran on Monday in a meeting attended by the SEO board members, chairman of ISC, Alaa Abdulhussein Al-Saeidi, Iraq’s ambassador to Iran, Sa'ad Jawad Qandeel.

A master-feeder structure is a device to pool capital raised from investors into a master fund. Investors put capital into their respective feeder funds, which ultimately invest assets into a centralized master fund. It is the master fund that actually invests in the market, according to Financial Tribune.

The master fund is responsible for making all portfolio investments and conducting all trading activity. Management and performance fees are paid at the feeder-fund level. The primary purpose served by the feeder fund master fund structure is reduction of trading costs and overall operating costs.

Among other things, the MoU includes agreements on opening a branch of Iran Mercantile Exchange in Iraq, creating conditions for two-way import and export of goods through a mercantile bourse and offering advice on legal and technical issues related to capital market.

On improving the financial culture for capital market investors, the two sides agreed to sharing experience on financial literacy, bilateral cooperation to organize exhibitions in Iraq, creating a virtual platform for simulation of stock market in Arabic language, publishing Arabic-language books on capital market and holding  MBA courses in Iraq.

SEO chief, Shapour Mohammadi, said both sides agree to create the grounds that would make it possible for Iranian companies to be listed in Iraq’s capital market and Iraqi companies to be listed in Tehran Stock Exchange, adding that a special taskforce will first review the relevant prospects.

They also discussed ways to coordinate and integrate legal mechanisms governing the capital markets in the two capitals.

Expanding Financial Instruments

Mohammadi underscored the intention of both sides to expand Islamic financial instruments, saying that the MoU will pave the way for bilateral participation in developing IT infrastructure in the capital market and creating joint investment funds.

“Given the close cultural proximity between the two countries, we can taken effective measures to strengthen the Islamic financial instruments,” he said.

The CEO said studies will be undertaken on the provisions of the MoU by a joint taskforce.

On the sidelines of the ceremony, Al-Saeidi, commended two-way economic relations as “distinguished and unique” saying his country is interested in benefitting from Iran’s experience in financial markets.

The Iraqi amabassor referred to the recent meeting between Iraq’s Prime Minister Adil Abdul-Mahdi and  President Hassan Rouhani, saying the MoU is in line with agreements reached by the two leaders.

“The MoU signed today is an indication of the deep bonds between the two neighbors,” he said.

Iraq is a key trading partner for Iran, as it is one of the biggest importers of Iranian goods and services, including natural gas and electricity, crucial to the Arab country’s faltering power sector.

According to reports, Iraq was the second biggest destination of Iran's non-oil exports in the last Iranian year that ended on March 20, 2019. Iraq’s imports from Iran in the last calendar year (March 2018-19) grew by 49% in volume and 37% in value to reach 19.76 million tons worth $8.9 billion.

Iran’s exports to Iraq included liquefied natural gas, mineral oil, cleaning detergents, low-density oils and tomatoes.

Reports have it that the two countries have agreed to establish a non-dollar trading mechanism so that Iran can bypass the new US sanctions.