Funds

Essel Finance to launch $100-mn Shariah fund

Essel Finance is planning a Shariah fund for foreign investors in real estate. The Shariah fund will have a corpus of $100 million (Rs 620 crore). The fund is looking to close the fund forge partnerships with Shariah funds by February-March. Amit Goenka, chief executive officer, Essel Financial Services said the Shariah partner would offer the fund on its behalf and once the company gets its licence for the offshore fund it was planning, it would bring the Shariah component under its fold. Essel's offshore vehicle may also get its investors to directly invest in real estate projects here and not route it through the fund. The offshore fund has planned a corpus of $200 million. Its domestic fund does debt deals and charges developers with coupon rates of 18 to 19 per cent.

Demand for Islamic pension funds valued at USD190bn

The global demand for Islamic pension funds is currently between $160 billion and $190 billion, according to estimates by Ernst & Young's (E&Y) Global Islamic Banking Center. At present, most of these funds are parked under conventional sovereign pension funds due to lack of investment options. Several fast-growth emerging markets including Malaysia, Saudi Arabia and UAE are seeing strong demand for Shariah-compliant retirement plans. A key decision is whether to allow members of the fund to transfer their existing account balance to the Sharia-compliant fund, or if only the future contributions should be segregated as conventional or Islamic. Additionally, timing for the desired transfer is important. The fund would model the outcomes based on several factors.

Islamic Asset Management sector has potential to grow

The Islamic fund industry manages about $46 billion, only a tiny part of the total global asset management figure, which stands at $60 trillion. The issues that need be addressed for the Islamic asset management and investments to grow were discussed at the first Global Islamic Economy Summit 2013. Performance of the funds is key to bringing in clients, both institutional and retail. In a region, such as the GCC, where the retail component is extremely small, funds have to ensure capturing all the sectors in the market. Moreover, savings ratio in Muslim countries is low and awareness of mutual funds among retail groups is very low. With an attractive performance and support from the sovereign funds and pension funds and the governments, the sector may grow substantially.

EIIB-Rasmala launches Islamic trade finance fund

EIIB-Rasmala, a venture between London-based European Islamic Investment Bank and Dubai's Rasmala Group, has launched a sharia-compliant trade finance fund as a low-risk investment product. The Cayman-domiciled fund is linked to emerging market trade transactions and the firm hopes to attract $100 million into the fund over the coming year. The fund targets a return of 4 percent with low volatility as the firm continues to expand its sharia-compliant product range. Since last year, EIIB-Rasmala has launched three Islamic funds including a leasing fund and a sukuk fund seeded with $25 million of the company's own capital.

GCC Islamic funds enjoyed the highest fund flows post financial crisis

According to Thomson Reuters Global Islamic Asset Management Report 2014, assets under management of GCC Islamic funds have been increasing, post global financial crisis and the 2011 political turmoil in the Arab world. However, assets under management (AUM) have been decreasing for the global Islamic fund industry. While Islamic funds globally have doubled since 2007, the AUM have marginally gone up in the last few years, and have in fact declined 1.7 per cent in 2013. Of the total $62 billion assets under management, Malaysia, Saudi Arabia Luxembourg comprise the top three Islamic fund hubs. The full report will be released next week at the Global Islamic Economy summit in Dubai.

Pent up global demand for Islamic pension funds valued between US$160-US$190 billion, according to EY estimates

According to estimates by EY’s Global Islamic Banking Center, the pent up global demand for Islamic pension funds is currently between $160 bn and $190 bn. At present, most of these funds are parked under conventional sovereign pension funds due to lack of investing options. Since greenfield operations would take too long to satiate market demand, a more practical approach is the partial transformation of existing pension funds to carve out Shari’a compliant tranches. The transformation will need to be carefully planned to choose the right business model and operational framework. The choice of business model will determine the governance structure, the complexity of financial reporting, tax implications, and go-to-market timeframes.

Egypt's Ridge Capital plans Islamic fund of fund in 2013

Cairo-based Ridge Islamic Capital plans to launch the first dedicated Islamic fund of funds in the Middle East by the end of this year, with an initial capital base of $150 million. The Bahrain-domiciled fund will invest across a pool of sharia-compliant funds around the world. Ridge Islamic will contribute $15 million to the fund's capital. The Ridge Islamic fund will be U.S. dollar-denominated and use controls designed to limit risk, including exposure caps by country, sector and asset class. The rules will allow up to 20 percent of the fund's net asset value to be allocated directly into sharia-compliant financial instruments; up to 40 percent of net asset value could go into cash and Islamic money market instruments. The fund has a three-member sharia board with scholars from Egypt, Saudi Arabia and Bahrain.

BIMB will use funds for sukuk security

BIMB Holdings Bhd announced it has notified Bank Negara Malaysia that the security for its proposed sukuk will only comprise the legal assignment over the proceeds from the exercise of its proposed warrants. It includes the legal assignment and charge over a sinking fund account into which all proceeds from the exercise of the warrants will be deposited. The exchange has approved the listing of new shares, warrants and rights in relation to its proposed purchase of the remaining 49% stake in Bank Islam.

Biggest Malaysia Funds Plan to Buy Dollar Sukuk

Malaysia's two biggest state-owned pension funds plan to boost holdings of dollar sukuk.
It is said that their increasing presence in the global arena will help strengthen Malaysia's position as a global Islamic hub and enhance the country's visibility. It will also encourage more local and international issuers to sell dollar sukuk in Kuala Lumpur and around the world.

Islamic portfolios attract ethical investors in US

Ethical investment which has similarities with Islamic based investments has reached US$32 trillion (RM105.6 trillion) in size in the US and the European Unión, according to Nicholas Kaiser, a global investment manager specialising in the issues of ethical and Islamic investment. Though the number of very wealthy Islamic investors in the US were scarce compared to investors in conventional funds, he said his Amana funds are doing very well in the US. The funds attracted American citizens from all backgrounds and Muslim investors are only a small number of the investors in the Amana fund, he added. Nevertheless, it appears that while Amana’s success is the result of the discipline of its Islamic investment nature, investing in Islamic stocks does not necessarily bring profit to the investors.

Court orders HDG Mansur to pay $5.8M in dispute with Islamic funds

A judge has ruled that HDG Mansur Investment Services must return $5.8 million in fees it paid itself from two equity funds it managed under Islamic law. The Indianapolis real estate fund asset manager didn’t have the right to recalculate its fees to claim a higher take for itself, according to federal Judge Colleen McMahon of New York. The lawsuit contends that, starting in early 2012, HDG Mansur began paying itself fees in advance for future real estate transactions. When those deals never happened, the Indianapolis company came up with the underbilling rationale in an effort to cover up the unearned payments that they had been making to themselves. HDG Mansur was dropped as the funds’ manager earlier this year. The judge also ordered HDG Mansur to pay 9 percent interest on the fees that are to be returned.

Sedco to distribute Islamic funds via private banks

Saudi investment firm Sedco Capital plans to register its Islamic funds in Switzerland and distribute them through tie-ups with global private Banks. This is part of efforts to diversify its client base outside Saudi Arabia. Sedco Capital has incorporated environmental, social and governance (ESG) principles into two of the equity funds, widening their appeal to include ethically minded investors in general. The firm hopes this will allow its funds to be marketed to investors beyond traditional Islamic areas in the Middle East and southeast Asia. The firm aims to be able to source two-thirds of its assets under management from outside Saudi Arabia in four to five years. One fund is to be signed by October and the second one by December.Sedco Capital's two ESG funds, launched in May last year, have $230 million in assets and are managed by Stockholm-based Informed Portfolio Management.

Azzad Meets with South African Ambassador about Islamic Finance

Representatives from Azzad Asset Management met with His Excellency Ebrahim Rasool, Ambassador of the Republic of South Africa to the United States, to discuss potential investment in South Africa as part of the portfolio held by the Azzad Wise Capital Fund. The Azzad Wise Capital Fund is America's first halal fixed-income mutual fund and invests in Sukuk as well as deposits and notes from Islamic banks that comply with specific socially responsible and halal financial guidelines. In recent years, South Africa has made strides in Islamic finance although the Muslim community represents only 3% of the population. Ambassador Rasool noted that South Africa's regulatory and legislative structures, strict risk management frameworks, as well as governance and compliance structures make it a possible springboard for companies into the rest of the continent.

Making Sharia work

The UK government's national savings scheme, NEST, recently announced that HSBC was its choice of fund manager for its Sharia investment mandate. Chris Gower, head of European consultant relations at HSBC, said the fund follows a quantitative passive method. What is unusual it that the fund can have no exposure to financials. This practice leads to the Islamic index being overweight in the oil and gas sector and the healthcare sector. In terms of expectations of the fund Gower explains that HSBC works with a large number of UK defined contribution (DC) pension schemes. It opens up an investment universe to investors who would maybe otherwise not have the possibility to save for their retirement. Gower says the fund is looking forward to working together with NEST.

TFI’s Shariah JV fund acquires properties in UK

Barwa Bank’s investment banking division, The First Investor (TFI) and Investra Investments have announced the first two property acquisitions of their UK joint venture fund. The fund invests in income-generating property in the distribution, logistics and light-industrial sector of the UK, targeting net quarterly dividends of 7%-9% per annum and capital appreciation over three years. Both TFI and Investra have seeded the fund with approximately QR56mn capital from their respective balance sheets. TFI and Investra have put together an institutional grade investment programme in collaboration with Pelham Associates as well as internationally renowned lawyers, tax advisors and administrators to deliver best in class governance, investment management and risk management. TFI and Investra will be continuing their investment programme in the UK distribution, logistics and light-industrial sector until Q1, 2014.

Shariah compliant mutual funds yet to catch investors fancy

In India, there are only two fund houses, namely Tata MF and Taurus MF, which offer Shariah-compliant funds. Industry experts say that the major challenge in ethical funds is product awareness and its marginal market demand. These funds only cater to a particular section of society. Some experts also believe that the returns in Shariah funds are not very astonishing as compared to equity funds. Experts believe that creating awareness about these funds will help attract investors. Not only Muslims but also Hindu, Jain and other community might show interest after knowing the significance of these products, they added. The Taurus Ethical Fund was launched in 2009 and has benchmark of CNX 500 Shariah. The scheme has generated annualized returns of 20.97 percent since inception. The Tata Ethical Fund Plan A-G was launched in April 2001 and has given an annualized return of 21.36 percent. The benchmark of the fund is CNX 500 Shariah.

SEDCO Capital Global Funds (SCGF) offers the latest innovations by applying, for the first time, an ESG filter on its Shariah-compliant investment funds

Luxembourg-based SEDCO Capital Global Funds (SCGF) has announced the first ever Shariah-compliant funds managed according to environmental, social and governance (ESG) principles. The SEDCO Capital US Equities Fundamental Indexing® Fund and SEDCO Capital Global Higher Dividend Yield Fund are screened for compliance with international conventions and guidelines on environment, human rights and business ethics such as UN Global Compact and OECD Guidelines. Non-compliance is dealt with through a process of engagement and exclusion. The funds are targeted at institutions, high net worth individuals, family offices, and qualified distributors wishing to invest in a socially responsible manner, while complying with Shariah principles. The funds can also be distributed by banks who wish to offer this investment opportunity to customers.

SCGF announces first ever Shariah-compliant funds

Luxembourg-based SEDCO Capital Global Funds (SCGF) has announced the first ever Shariah-compliant funds managed according to environmental, social and governance (ESG) principles. The SEDCO Capital US Equities Fundamental Indexing Fund and SEDCO Capital Global Higher Dividend Yield Fund are screened for compliance with international conventions and guidelines on environment, human rights and business ethics such as UN Global Compact and OECD Guidelines. Non-compliance is dealt with through a process of engagement and exclusion. The funds will also incorporate proxy voting according to best corporate governance standards in its ESG programme. The funds are targeted at institutions, high net worth individuals, family offices, and qualified distributors wishing to invest in a socially responsible manner, while complying with Shariah principles.

New real estate fund from Saudi Fransi Capital

Saudi Fransi Capital has launched its new fund, the Saudi Fransi Real Estate Fund. The new fund seeks to achieve capital growth, by developing lands and real estate projects, along with the possibility of generating income stream by acquiring existing real estate in Saudi Arabia. It's a closed -- ended Shariah-compliant fund, with duration of four years from the day of closing, but may be extended for two successive periods of one year. The subscription period started on May 18 and will end on July 3. SFC signed a memorandum of understanding with a leading and renowned real estate developer, to be the principal real estate developer of the fund; the fund may assign other developers if needed. Yasir bin Othman Al-Rumayyan, CEO of SFC, said that the fund provides the opportunity for capital growth and generating income; since it generates cash during the development phase.

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