First FOF Will Help Finance Knowledge-Based Companies

EghtesadOnline: Iran launched the first ever fund of funds (FOF) on Sunday as part of measures to promote knowledge-based companies.

News ID: ۷۴۹۱۰۰

03 December 2019

The FOF is named ‘Setaregan’ (stars in Persian) and started operation after officials from three founding institutions signed an investment agreement, the Securities and Exchange News Agency reported.

Also known as a multi-manager investment, FOF is a pooled investment fund that invests in other types of funds. Its portfolio contains different underlying portfolios of other funds.

FOF strategy aims to achieve broad diversification and appropriate asset allocation with investments in a variety of fund categories that are all wrapped into one portfolio, according to Financial Tribune.

The Setaregan FOF was founded by the Imam Khomeini Order Foundation, Islamic Azad University and Vice Presidency for Science and Technology.

Commending private firms for their contribution to funding scientific projects, Sorena Sattari, vice president for science and technology, said “creating the fund was a valuable step toward promoting investments in knowledge-based companies in cooperation with the stock market”.

Sattari referred to constraints the government is facing with regard to funding knowledge-based companies.

“Scientific progress should be more the function of private investments rather the government involvement”.

Yasser Jalali, managing director of Barkat Ventures, a knowledge-based company affiliated to the Imam Khomeini Order Foundation, said the FOF aims to invest 6.5 trillion rials ($52.4 million) in other specialized funds, including venture capital funds.

Drawing parallels between the spread of venture capital in Iran and the world, Jalali said venture capital accounted for $275 billion investment across the globe in 2018, while Iran’s share was a meager 10 trillion rials (80 million rials).

Venture capital is a form of private equity and a type of financing that investors provide to startups and small businesses that are believed to have long-term growth potential.

It generally comes from big investors, investment banks and financial institutions. However, it does not always take monetary form and can be provided in the form of technical or managerial expertise.

Venture capital is typically allocated to small companies with exceptional growth potential, or to companies that have grown quickly and appear poised to continue to expand.

Officials at Iran’s capital market have a plan to develop a new market index to track and evaluate the performance of venture capital, in line with efforts to expand the role of venture capitals in funding knowledge-based companies.