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Barclays Capital in Dubai to back Sharia-compliant hedge funds
BlackRock Inc, the largest publicly traded US money manager, and Ospraie Management, are among five companies that will start Sharia-compliant hedge funds based in Dubai.
- Bloomberg
- Published: 10:53 June 19, 2008
Dubai: BlackRock Inc, the largest publicly traded US money manager, and Ospraie Management, are among five companies that will start Sharia-compliant hedge funds based in Dubai.
The funds will get $50 million each in so-called seed capital from the Dubai Multi Commodities Centre Authority, a government-backed agency.
Barclays Capital, securities unit of Britain's fourth-largest bank, will also back the funds which will start in the next two weeks, said Frank Gerhard, the bank's head of fund-linked derivatives strategy in an interview.
Sharia forbids investment in companies judged by scholars to be highly indebted, and those involved in alcohol, gambling and weaponry.
Financial information companies including Standard & Poor's and Dow Jones & Co. have started Islamic indexes that show only Sharia-compliant companies. The world's Muslim community has about $3.6 trillion of combined wealth, Standard & Poor's estimated in 2006.
"There's demand in the market,'' Gerhard said. "If there are significant inflows in the hedge fund space they will be coming from the Middle East. This is a product they can use.''
John Paulson, founder of the hedge fund company Paulson & Co, said global writedowns and losses from the credit crisis may reach $1.3 trillion, exceeding the International Monetary Fund's $945 billion estimate.
The five commodity-based funds will trade on the Al Safi Trust alternative investment platform, with Shariah Capital Inc as adviser and Barclays Capital as prime broker. The three other funds include Tocqueville Asset Management, Lucas Capital Management and Zweig-DiMenna International Managers.
"All the five are best-of-breed asset managers,'' said Eric Meyer, Shariah Capital's president and chief executive officer, in an interview.
"For them to say we're going Sharia should resonate.''
Demand for Islamic investments has increased as oil money floods into the Persian Gulf.
The global Islamic finance industry's assets under management are increasing by 15 percent a year and may have topped $1 trillion, according to the Malaysia- based Islamic Financial Services Board.
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