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Harneys advises on first EU-approved, Iran-oriented alternative investment fund

30 November 2015

The Cyprus Securities and Exchange Commission has today given the green light for the direct investment into Iran by Turquoise Variable Capital Investment Fund PLC (Turquoise Fund), the first EU-approved Iran-oriented alternative investment fund. Turquoise Fund will invest in blue-chip sanctions compliant securities listed on the Tehran Stock Exchange.
 
“This is a landmark decision for Cyprus,” notes Emily Yiolitis, founding partner of Harneys in Cyprus, “not only because it signals the activation of a complex structured fund in Cyprus, backed by internationally renowned players like Turquoise Partners Group and Charlemagne Capital but also because it opens up an entirely new market for Cyprus, that of Iran, which is expected to witness exponential growth once sanctions are fully lifted, a development placed by many industry insiders at the start of 2016.”

Partner Aki Corsoni-Husain adds “Turquoise Fund has been authorised in Cyprus as a full-scope AIFMD and EU sanctions compliant fund for investment into Iran. Under the AIFMD its manager will have the right to market fund units to professional investors from across the European Economic Area, comprising all 28 EU member states plus Iceland, Liechtenstein and Norway. For the first time in many years professional investors will have the opportunity to add exposure to the Tehran Stock Exchange through an EU fund vehicle subject to robust regulation and compliance.”
 
Charlemagne Capital is a London based, AIM listed asset manager with US$2.3 billion under management specialising in developing markets and has partnered up with the Iranian financial services heavyweight Turquoise Partners who manage over 90 per cent of foreign investments on the Tehran Stock Exchange. “Relief from economic sanctions may triple growth by removing barriers to the nation’s oil exports and ending the isolation of its banks from the global financial system,” reports Dominic Bokor-Ingram, a portfolio adviser at Charlemagne on Bloomberg, adding “We want to make sure our portfolio is exposed to companies that take advantage of that economic growth.”
 
Both Charlemagne and Turquoise Partners will act as professional advisers to the AIFM of the new vehicle. The AIFM for the Turquoise Fund is Fortified Capital Limited (Forticap) based in Nicosia, Cyprus and led by CEO Ioannis Gaiganis.  ATG Fund Services Limited, also of Nicosia and led by Andreas Athinodorou, provides fund administration and company secretarial services. Who Trades Limited acts as Turquoise Fund’s depositary for AIFMD purposes. Mr Gaiganis comments: “The opportunity to invest in Iran has rarely been so attractive and any professional or qualified investor may now seize this opportunity through the Turquoise AIF. As the current obstacles linked to the Iranian market are gradually lifted, the attractiveness of investing in one of the more developed markets in the Middle East will grow tremendously. As the AIFM of the Turquoise AIF, our goal is to deliver this potential to investors and to do so with the highest standards of investment and risk management, regulatory compliance and operational soundness within AIF rules.”

Harneys advised on the fund’s establishment, led by Partners Aki Corsoni-Husain, Demetris Loizides, Emily Yiolitis, Philip Graham and Marco Martins, capitalising on its global legal expertise in funds, tax planning, regulatory and sanction compliance from the law firm’s offices in Limassol, London, Hong Kong, Cayman and BVI in a coordinated effort which exemplifies the type of complex cross border structuring in which the firm excels.
 
The international press has already announced the Charlemagne-Turquoise investment into Tehran, which at a first stage is contemplated to reach EUR 100 million. “I would like to thank the Ministry of Foreign Affairs for their positive stance on our sanctions compliance due diligence as well as the Cyprus Securities and Exchange Commission for their constructive approach during the application phase”, Emily added. “I hope this will add to our panoply of jurisdictional investment products and target markets, setting a precedent for Cyprus to act as a regulated, tax efficient stepping stone for structured investments into Iran.”