First mover advantage
We believe there is money to be made for first movers coming into the market in early 2016. Longer term, the road looks more uneven and the chances of having stranded investments are just as likely. The purpose of the trip was to acquaint ourselves with Iran and its idiosyncrasies, which we have done in part, but need more time with companies and government officials to become truly comfortable investing.
Issues such as business transparency and corruption are also central in the development of any frontier economy. In transparency terms, Transparency International’s 2014 Global Corruption Index ranked Iran 136 out of 175 countries.
However, interest in Iran will only grow going forward because of its reintegration into the global economy, its huge hydrocarbon power, and its positive demographics. Institutional investors, however, will probably face some challenges in areas of liquidity and corporate governance.
Challenges such as these are not uncommon as markets open up, and there are always areas for experienced investors to uncover neglected companies with healthy or improving operations.
Ultimately, with a focus on quality, investment in Iran could prove rewarding, especially given the very low valuation starting point. In addition, with Iran being one of the last great frontier markets left to invest in, it could potentially provide one of the final pieces of the investment puzzle for some investors.
