Islamic finance now a hot topic

Dubai: Islamic finance featured heavily in Tuesday's opening session of the 10th annual Hedge Funds World Middle East Conference.

The past 12 months have seen the launches of two Sharia-compliant hedge funds, the first by Dubai-based Shariah Capital Inc and the second by Deutsche Bank.

Despite the global economic downturn, Islamic finance is projected to grow 15 per cent this year, down from 25 per cent in 2008, said Eric Meyer, Shariah Capital Chairman and CEO.

"Islamic finance is an opportunity if we, Western managers, want to comply," said Meyer. "In this challenging investment market, one of the few bright spots, contrary to the rest of the world is Islamic finance."

Shariah Capital, in partnership with the Dubai Multi Commodities Centre Authority (DMCCA) and Barclay's Capital, launched Al Safi Trust featuring four funds specialising in gold, energy, commodities and natural resources with a total investment of $200 million.

Two of the funds continue to remain in positive territory, according to Meyer. In January, the Thompson Reuters-calculated index for the funds registered a 1.53 per cent increase, led by the gold fund, which registered a 4.42 per cent increase.

Despite lacking universally accepted standards, Islamic finance continues to draw interest from Western financial institutions because of its size and continued growth. DMCCA Executive Chairman Ahmad Bin Sulayem said regional investors are estimated to hold $1 trillion (Dh3.67 trillion) in Sharia-compliant assets overseas.

"There's a great appetite for Sharia-compliant hedge funds," Bin Sulayem said, attributing the continued growth of Islamic finance despite the global financial crisis to the transparency the system offers.

As a standard practice, the funds are managed using separate accounts and are monitored by Sharia scholars for compliance with Islamic finance rules.