Dubai: Falcon Private Bank, a Swiss private bank owned by Abu Dhabi’s Aabar Investments, is planning to launch a fund early next month that will invest in global Islamic bonds, or sukuk.
The fund will be offered to the bank’s clients and could grow to $500 million, Zafar Khan, Falcon’s Mena chief executive, said on Tuesday.
“We already have substantial demand from our clients” for global sukuk investments, Khan said, adding that debt that complies with Islam’s prohibition on charging or paying interest was set to take off.
Arab Gulf sukuk issuance could rise sharply this year to $35 billion, according to HSBC forecasts, and issuers already in 2013 include the Dubai government and the Dubai Electricity and Water Authority. Investor demand lately has been strong, resulting in narrower spreads and lower yields.
“I think yields that we have seen in the past two to three years were not realistic yields,” Khan said. “They were dislocated. I would say the yields we currently see are more realistic to the underlying risk we want to take.”
Aabar Investments is owned by the International Petroleum Investment Company, an Abu Dhabi government vehicle. Aabar completed its purchase of the Zurich-based Falcon in 2009 from AIG, the American insurance giant, for $253 million.