DAR AL HARB-U.K.: SHARI'AH COMPLIANT HEDGE FUNDS...

Hedge funds cater to Islam law
James Mackintosh, London
December 23, 2006

THE first Sharia-compliant hedge funds have been launched after the London prime broking arm of French bank Societe Generale developed systems to replicate the effects of selling shares short without breaking Islamic law.

Three funds have been seeded with a total of $US60million ($76 million) by a large Middle Eastern bank, and Old Mutual Asset Management is about to launch a fourth.

The moves mark the opening of a market that could attract tens of billions of dollars from the estimated $US500 billion investors have to put into Sharia-compliant investments.

An increasing number of Arab financial institutions have rules requiring some or all of their money to be run in compliance with Sharia law, which bans interest and short-selling, prompting rapid growth in Sharia-compatible investments.

Philippe Teilhard, London-based head of prime brokerage at Fimat, the SocGen subsidiary, said the aim was to create an investment with risk and return between equity and sukuks, or Sharia-compliant bonds.

There have been a handful of attempts to launch Sharia-compliant hedge funds, with Shariah Capital - which listed on London's AIM junior market last week - developing a Sharia-compliant equivalent of short-selling with the prime brokerage of Barclays Capital in New York. So far, though, its first hedge fund partner has not raised the $US25 million needed to start operations.

The funds that have launched with Fimat are the Stark Al-Noor fund, from Wisconsin-based Stark Investments, the Al Raed Emerging Markets fund from London's North of South Capital, and a third from an unnamed London hedge fund manager.

Mr Teilhard said Old Mutual would launch its Al Saqr fund next month, while a further seven launches were planned in the first quarter.

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Now read this:

Islamic Economics and Shariah Law: A Plan for World Domination


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