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UPDATE 1-Lansdowne ready to invest in Iceland when it reopens
October 3, 2017 / 12:21 PM / 17 days ago

UPDATE 1-Lansdowne ready to invest in Iceland when it reopens

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By Steven Scheer and Tova Cohen

TEL AVIV, Oct 3 (Reuters) - British hedge fund Lansdowne Partners plans to invest in Icelandic equity assets when the country re-opens to investment, its chairman Stuart Roden said on Tuesday, citing a tourism boom and exposure to high-tech growth in Europe.

Iceland has become a growing source of interest for hedge funds, despite some restrictions on foreign investors still remaining after the lifting in March of most capital controls imposed after the 2008 global financial crisis.

Lansdowne, one of Europe’s largest hedge funds, has delivered gains in many of its strategies this year after a tough 2016. The Lansdowne European Equity Fund is up 16.9 percent to Sept. 22, while the Lansdowne Developed Market Fund is up 5.6 percent over the same period, according to data from an index compiled by HSBC.

“We are ready to invest in Iceland when it opens up,” Roden said at the Sohn Conference in Tel Aviv. “Iceland has gone through an amazing transition.”

Iceland, he noted, was among the first countries to be hit by the 2008 crisis that ultimately led to its financial collapse. But since then, debt has fallen, while tourism has jumped to 2.4 million visitors in 2016 from some 500,000 eight years ago. In a country with a population of 350,000, tourism is now a third of gross domestic product.

At the same time, 6.1 percent of its workforce has links to Europe’s high-tech sector, second only to Ireland.

“Everything is set as a place to invest but it’s not yet open to people to invest in equities,” Roden said, optimistic the country will open up to foreigners for a bank stake sale early in 2018.

Iceland may float Arion Bank, the domestic arm that emerged from the collapsed Kaupthing bank, and which is expected to lead to a surge of new foreign money into a stock market that currently lists just 17 firms.

Roden also said he was upbeat on Lufthansa, Germany’s largest airline, given reduced capacity by Middle Eastern carriers out of Europe amid falling oil prices and the insolvency of Air Berlin.

Airlines, he said, are difficult investments since they are cyclical. But in the case of Lufthansa, Lansdowne is looking at supply rather than demand.

If Lufthansa buys Air Berlin assets “it would be able to restructure the market and that has huge implications on pricing and yield management,” Roden said.

“If we are right we can see 10-12 percent cash flow yields over the next two years and a big appreciation in the share price,” he added.

He also recommended steel firm ArcelorMittal as well as property markets in Germany and Ireland, particularly Berlin and Dublin. (Additional reporting by Maiya Keidan in London; Editing by Mark Potter)

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