Iran Etf: A Guide To Investing In Iran's Future

Iran has one of the best-performing stock markets in the world, and investors are keen to get in on the action. In 2015, investment firm Turquoise Partners launched an exchange-traded fund (ETF) that mirrors the TSE 30 index, which includes the 30 largest publicly traded Iranian companies. However, only investors in countries that have not imposed sanctions on Iran can participate in the fund, which excludes Europeans and Americans. For those who cannot invest directly in Iranian companies, an alternative option is to invest in companies that will profit from doing business in Iran, such as telecom companies.

Sanctions and restrictions

US citizens are restricted from investing in Iranian companies or ETFs due to sanctions. The same applies to most Europeans. The only investors who can participate in the Iranian ETF are those in countries that have not imposed sanctions on Iran, which means the fund is largely geared towards Iranians and Middle Eastern investors.

One way to get around these sanctions is to invest in companies that will profit from sanctions being lifted. For example, telecom companies can expand their market if sanctions are lifted.

Despite the sanctions, there is an open-ended ETF provided by Turquoise Partners, a private equity fund based in Europe. However, this fund has a high minimum investment of €125,000 and fees of 2/20.

It is also possible to invest directly in the Tehran Stock Exchange via a broker, but this route may not be cost-effective for smaller investors.

The Tehran Stock Exchange

The TSE has a history spanning over two decades and includes nearly 600 companies, with $200 million in daily liquidity. The TSE 30 index comprises the 30 largest publicly traded Iranian companies, including petrochemical companies, oil refiners, mobile companies, steel companies, and financial firms.

The TSE has seen strong performance, with a monthly return of 7.5% and a six-month return of 14% as of 2015. However, it is important to note that the TSE is subject to geopolitical risks and US sanctions, which have impacted Iran's overall economy.

For foreign investors, it is crucial to consider the sanctions in place and ensure compliance with applicable laws. As of 2015, only investors from countries that have not imposed sanctions on Iran can participate in the TSE, which excludes Americans and most Europeans.

The TSE provides an opportunity for investors to access fast-growing Iranian businesses across various industries, including utilities, automotive, commodities, and agriculture. It is a regulated market with transparent and supportive standards, offering a diverse range of investment options.

Turquoise Partners ETF

Turquoise Partners is an Iran-focused, privately-owned international financial services group based in Iran. It was established in 2005 and offers a range of financial services to foreign and domestic clients, including asset management, brokerage, and investment banking services.

In 2014, Turquoise was the largest manager of foreign portfolio investment on Iran's capital markets. The group has a particular focus on creating different types of investment instruments to cater to a variety of investor interests.

Turquoise Partners launched an exchange-traded fund (ETF) in 2015, which mirrors the TSE 30 index, comprising the 30 largest publicly traded Iranian companies. These include petrochemical companies, oil refiners, mobile companies, steel companies, and large Iranian financial firms.

The Turquoise TSE30 Index ETF is geared towards investors who can legally do business in Iran. Due to sanctions, this currently excludes Europeans and Americans. The fund provides investors with exposure to a range of industries in Iran, including utilities, automotive, commodities, and agriculture.

Turquoise Partners also has a local regulated asset management company, Tose' Firouzeh Asset Management, through which it manages tailored accounts for local and international clients. In addition, the group has a majority stake in an Iranian brokerage firm, Firouzeh Asia, a joint venture with Asia Insurance, Iran's largest private sector insurance company.

Iranian equities

The TSE is dominated by retail investors, with foreign investors making up less than 0.5% of the market cap. This is due in part to sanctions imposed on Iran by the US and other countries, which restrict the ability of certain investors to participate in the Iranian market. For example, the Turquoise Partners ETF, which mirrors the TSE 30 index, is only available to investors in countries that have not imposed sanctions on Iran, ruling out Americans and most Europeans.

Despite the challenges posed by sanctions, some investors remain interested in Iranian equities due to the potential for high growth in a diversified economy. Iranian equities can provide exposure to a range of industries, including utilities, automotive, commodities, and agriculture.

One way to gain exposure to Iranian equities is through exchange-traded funds (ETFs). As of 2020, Iran had three ETFs offering shares of state-owned organizations and companies, with a fourth in the works. These ETFs provide access to a range of industries, including banking, insurance, car manufacturing, and metals.

Another option for investing in Iranian equities is to invest in companies that are expected to profit from improved relations with Iran. For example, telecom companies could benefit from the expansion of their market if sanctions are lifted. This approach provides some exposure to the Iranian market while reducing the risk associated with direct investment in Iranian companies.

US-Iran relations

Historically, the US and Iran (then known as Persia) had positive relations, with the US seen as a more trustworthy foreign power than Britain and Russia during the Great Game. This continued until the 1950s, with the US playing a critical role in founding the Shah's secret police, SAVAK, to keep him in power.

In 1953, the US and UK orchestrated a coup against the government of Prime Minister Mohammed Mossadeq, which led to the Shah's regime becoming closer to the US. This coup was seen by many Iranians as a significant cause of the anti-American sentiment that led to the 1979 Revolution.

The US supported the Shah's regime until it was overthrown in 1979, after which the US embassy in Tehran was seized and American diplomats were taken hostage. This event, along with the Iranian Revolution, led to the severing of diplomatic relations in 1980.

Since then, relations have been marked by periods of high tension, such as during the Iran-Iraq War when the US provided support to Iraq, and brief rapprochements, such as during the Iraq War and intervention against ISIS when the two countries had overlapping goals.

The US has had an embargo on trade with Iran since 1995, and sanctions have been a significant feature of US policy towards Iran. In 2015, the US negotiated a nuclear deal with Iran, which was later withdrawn from by the Trump administration in 2018, leading to a new round of sanctions.

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