DAR AL HARB / ISLAM - U.K. / UMMAH: ECONOMIC JIHAD EXPANDS IN EURABIA

HSBC Plans to Start Raising Funds for Islamic Buyouts (Update1)
By Will McSheehy

March 21 (Bloomberg) -- HSBC Holdings Plc, the world's third- biggest bank by market value, plans to start raising client money this year to buy companies complying with Islamic Shariah law after a two-year experiment with its own funds.

Islamic private equity has been ``slow to start, so its potential to outperform is that much greater,'' Mahmoud Atalla, head of HSBC's Amanah Islamic buyout unit, said in an interview this week in Dubai, United Arab Emirates.

The London-based lender started its Islamic private equity unit in 2005 with $50 million of its own funds to invest in European companies, according to Atalla. It will start collecting as much as $500 million for the unit this year, after identifying a $1 billion potential pool of high net worth and institutional money it could attract, he said.

As oil-fueled economies boost Arab wealth, private equity funds are raising record sums to spend on companies that are acceptable investments under Shariah law, which bans investment in businesses such as gambling, arms-making and alcohol. Abraaj Capital Ltd. and Deutsche Bank AG in May started a $2 billion Islamic buyout fund they plan to leverage to $20 billion of buying power. Dubai Islamic Bank has started building a $5 billion group of seven funds it will leverage to $10 billion.

Even though about 15 percent of potential buyout targets are excluded because they don't comply with Shariah, the number of growing companies seeking Islamic investors means returns are equivalent to conventional private equity, Atalla said.

...


Pertinent Links:

1) HSBC Plans to Start Raising Funds for Islamic Buyouts