Ryada Capital launches Islamic hedge fund

Based out of Kuwait, the fund has a minimum investment of $1m, and aims to provide 20 per cent annual net returns.

According to the Bank of New York hedge funds will increase from around $360bn today to over $1 trillion in 2010, as more institutions increase their allocations in them. Where 16 per cent of institutions did not invest in hedge funds in 2004, State Street Research says that figure has now dropped to four per cent.

Islamic finance is seen in Muslim countries as providing a socially responsible form of investment. Ryada believes that increasingly, as more people look for Shariah compliant financial options, hedge funds such as this will attract investors.

Laura Stone, vice president of Alternative Investments at Ryada, told AME Info: 'There are a few Islamic hedge funds running out of the US and Europe, but we believe people will be looking for funds run out of the Middle East.'

Being Shariah compliant the Siraj Global Fund will not invest in companies involved in areas such as gambling, alcohol, pornography or pork, among others. Equally, it had to pass strict criteria laid down by its Shariah board, Al Mashoura. The board will continue to review investments made by the fund to ensure future Shariah compliance.

It is aimed at Islamic investors that wanted a low-risk fund and to diversify their portfolio. Stone said that to be compliant, the company had to alter the way it offered the fund. This includes asking for a non-refundable deposit. 'You put down a deposit to have an option to buy at a specific price. You are making a commitment to purchase the stock but you have the right to cancel if you decide not to exercise the option.'

Setting up the fund took around one year, compared with the few months it typically takes when not Shariah compliant. The open ended fund targets the rich and institutions and subscriptions are not limited.

See also:
Working With Islamic Finance
Setting shariah standards
Iran's financial sector: a different view