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Earlier this year, I published a three-part series about Uzbekistan undergoing massive political changes and opening up to foreign investment. Obviously, this is a country that few of us could have even located on a map. Somewhat to my own surprise, my reporting proved hugely popular with my readers.
As I promised back then, I was going to give my readers a heads-up once an easy-to-access, legitimate entity for investing in this frontier country became available.
Which is why today, I wanted to briefly point you towards the first closed-ended Uzbekistan investment fund that is soon going to IPO. Anyone whose bank or broker can buy and sell on the London Stock Exchange can subscribe to the fund. The IPO subscription period is likely to begin on 8 July, with the first day of trading on the London Stock Exchange likely to be 18 July.
The Uzbekistan opportunity in a nutshell
If you missed my Uzbekistan articles at the time, feel free to catch up on them:
- Part 1: Introduction to the country 
- Part 2: Why are frontier markets so interesting to invest in 
- Part 3: What I learned during my visit to the stock exchange in Tashkent 
For a quick introduction to the subject, you can watch this 3-minute video by the Financial Times  (in which, for better or worse, I make a brief appearance).
Things have moved on a fair bit since then.
It was December last year that I signed up to join what was to become one of the very first foreign investor trips to Uzbekistan. At the time, it wasn't even clear if there were going to be enough people to organise the trip. Uzbekistan wasn't exactly on anyone's radar screen back then.
It turned out that my instinct had taken me to the right place, at the right time. Just after I came back, Uzbekistan started to be all over the news:
- The country successfully placed its first US dollar denominated international bond issue , which was oversubscribed eight (!) times.
- Global media outlets took turns to report about Uzbekistan, though the Financial Times' in-depth piece  in its capital market section was among the best.
- Other international investors started to book flights to investigate, e.g., one trip last week had no less than 40 (!) participants.
It's not surprising that Uzbekistan is seeing so much interest:
- Valuations are low, especially if you invest in private equity or start-ups.
- Uzbekistan has many of the right ingredients, such as a well-educated, young population, quite a few natural resources (including the world's largest open-pit gold mine), and tremendous tourism potential (because of UNESCO World Heritage-protected Samarkand and other landmarks of the ancient Silk Road).
- Whereas there is never a guarantee for anything in politics, it does look like the current government is dedicated to continuing rapid, far-reaching reforms.
If it works out, investing in Uzbekistan could turn out to be one of those rare ground floor opportunities where adventurous investors multiply their money because years of strong economic growth lift the value of just about everything.
Until now, the problem was that there was not a single Uzbekistan-related company or fund traded on a Western stock exchange that ordinary investors could invest in.
Here is how this is going to change.
Enter the first LSE-listed Uzbekistan fund
Oltin PLC is a newly-created investment company, but one that has extensive Uzbekistan expertise behind it. The company was initiated by Sturgeon Capital, a London-based pioneer market fund manager with over a decade of experience in Uzbekistan. Its local partner and advisor, Orient Capital in Tashkent, is one of the longest-established securities firms in the country.
The team behind Oltin is in the final throes of raising an initial EUR 30-50m to invest mostly in Uzbek private equity and start-ups. Some of the first investments are already lined up, i.e., part of the investment company's cash will be put to use on day one after its official launch.
I am not going to publish an in-depth report about Uzbekistan (or Oltin) in the Member's section of my website, because my focus for these reports is a different one:
- Established companies with a long track record.
- Stocks with very liquid markets.
- Business models that are either easy to understand or based on a well-known brand.
Still, I know from reader feedback that there is quite some interest out there for the Uzbekistan opportunity.
Which is why I wanted to let you know:
- The folks at Sturgeon Capital, who I know personally, are good guys. If you wanted to invest in Uzbekistan, these are the right people for you to speak to.
- I can't judge the details of all the investments that Oltin will be pursuing. But I saw some of them when I visited the country, and they made sense to me.
- The documents published about Oltin, i.e., the Admission Prospectus and obligatory PowerPoint presentation, are very informative. I just had a look at them myself.
If you wanted to know more about this, email [email protected]  to have them send you their information package. Or you can simply instruct your bank or broker to subscribe to the issue when the subscription period has begun. The ticker symbol will be "UZBK.LN".
Once the subscription period has begun, you'll be able to invest on the same terms as all the other fund investors, i.e., for an issue price of EUR 10 per share. This sort of closed-ended funds can then trade at a premium to their net asset value or at a discount to their net asset value. I suspect that trading for this fund will commence with a premium, because there'll inevitably be media reporting about the new company but no one will want to sell for anything less than a (small) premium to the issue price.
Yet another alternative – go and take a look yourself!
Frontier markets like Uzbekistan used to be fairly common in the 1990s. Western Europeans could find them on their doorstep, literally. You just had to venture slightly to the East, where capital markets were only just beginning to form.
Nowadays, however, most parts of the world are relatively developed. Relatively speaking, it's now much more difficult to find viable frontier markets and get in early. You have to go a bit further afield.
Frontier market funds like Oltin are an investment that is best put away for five to seven years. Though I also recommend to regularly check on the situation of the country, and if anything on the political front massively changes, then it may be necessary to reconsider the investment somewhere along the way.
Obviously, you could also use an investment in this fund as a justification to go and look at the country yourself. Samarkand, I have no doubt, will develop into one of the world's great tourism destinations and (for better or worse) "bucket list items". Tashkent has many hidden charms, too. No doubt there are lots of other interesting spots in the country that I am not even aware of yet. You could check on your investment, and treat yourself to an unusual (and, by the way, entirely safe) travel experience.
Knowing my readers, I am actually sure that some of you will pursue this suggestion. For those of you who go – do send me a postcard!
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