Investors Bullish on Iran as Talks Proceed

Although negotiations between Iran and the U.S. appear to be progressing “many people seem to think that means sanctions will be lifted, but I don’t believe that will be the case for a while,” she said. “Interest levels for Iran are certainly high and people are calling us, wanting to know what’s out there, but while it’s true that Iran is a large and liquid market with a variety of securities and it looks cheap, it’s very hard to tell from here how things really are.”

Even if sanctions against Iran were to ease in the near-term, the capital markets are not high on the priority list, Graham said. Then, too, Iran lacks the necessary infrastructure to support capital market activity and portfolio investment: “Who do you use as a banker, who would your custodian be? The financial infrastructure just isn’t there in Iran. Also, a large portion of the more liquid companies are either owned by a government entity or connected to the Revolutionary Guard, so even if the macro picture may look attractive, from an ethical perspective, we wouldn’t want to invest in those companies,” she said.

The U.S. still designates Iran as the most active state sponsor of terrorism and at this juncture, there really is no telling how the negotiations will end and what sort of deal will be brokered between the two countries. But for Iran’s future, it is vital that the ending be positive and that sanctions be eased, Robertson said, because “without lots of money going into Iran, things are going to be very painful.”

Iranians are particularly hopeful that the potential easing of sanctions will bring investment into the oil and gas industry, and this is urgent, Robertson said, since Iran has not been able to exploit its shared oil fields with Iraq and gas fields in Qatar.

“The longer they wait, the greater the chance that those fields will be emptied, so they very much the energy investment,” he said. “The Iranian economy also needs investment badly and if that doesn’t come through, then it’s likely to fall even further behind its peers.”

There’s no doubt, though, that interest levels are high, and First Frontier’s upcoming investor trip to Tehran follows a year’s worth of laying the groundwork for investment into Iran. Investors approached the firm to ask about Iran, Banszky said, and after some initial legwork, First Frontier was able to tie up with an Iranian investment banking firm, The Agah Group, signing an agreement to provide research in English on leading Iranian companies.

While in Tehran, the investor group will meet with the management of a few of these companies, he said, and though this is a very first step into the country, the Iranian market certainly looks attractively undervalued relative to other markets. “Once we start rolling out the research we will have a better idea and be able to better understand the opportunities,” Banszky said.

First Frontier has been trying to put together an investment vehicle for Europeans to invest in even with sanctions still in place, something that is “100% legal from the EU perspective,” he said. However, although the domestic Iranian market functions very efficiently, the lack of any kind of financial infrastructure for international investors to settle their trades is a huge impediment, he said.