From the wall street journal.....Very interesting!

Mutual funds look beyond chaos in Iraq

Friday, March 17, 2006
By Jennifer Levitz, The Wall Street Journal

Considering the strife bordering on civil war, this may not seem like the best time for mutual funds to put money into Iraq.

But some are doing just that. Looking for high yields -- and confident that oil reserves will be there to repay the debt -- mutual funds are among the investors quietly buying small chunks of about $2.8 billion in bonds issued by the Iraqi government in January as part of its restructuring of debts left by Saddam Hussein.

T. Rowe Price Group Inc., based in Baltimore, says about $16 million of its $558 million Emerging Market Bond Fund is invested in the new Iraqi bonds. Standish Mellon Asset Management Co., of Boston, says it has about $2 million in Iraqi bonds, spread out among some of its emerging-market mutual funds. It declined to identify the funds but said they had a total of $400 million in assets.

ING Group and Merrill Lynch & Co. recently showed up on a brokers-only computer network as bidders for the Iraqi bonds, one person with access to the system says. It couldn't be learned whether the firms were interested as buyers for their own accounts or for customers. Merrill and ING said they couldn't comment on interest in Iraq.

John Peta, a portfolio manager for emerging-market strategies at Standish Mellon, isn't surprised that the topic is touchy. "Given what's going on in Iraq, people don't want to fess up to owning" Iraqi debt, he says.

Interest in Iraq is a sign of how hungry some fund managers have become for high-yielding issues that can satisfy investors in emerging-markets bonds, which have been on a hot streak. During the past three years, diversified emerging-market funds have earned an average 36 percent annual return, according to Chicago fund-research firm Morningstar Inc. Investors put $10.1 billion into emerging-market bond funds in 2005, more than double the amount in 2003, according to Emerging Portfolio Fund Research, of Cambridge, Mass.

READ THE REST:

http://www.post-gazette.com/pg/06076/672237.stm
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