Ryada Capital Investment Company, based in Kuwait, said this weekend that it is designing a hedge fund that will comply with Islamic law. The fund will carry an initial value of $100 million and will target low-risk investments. Fund managers hope to increase the size of the fund to $300 million within the next three years.
The fund will scarcely employ short selling or other speculative strategies. The law of Islam forbids both gambling and lending on interest, and the jury remains out on whether short-selling counts as either, so the practice will be "limited." Ryada Chief Executive Jamal Al-Saeed told Reuters that short selling will only be used "in case we need it," adding "speculation happens, it's human nature. But it's not the essence of the fund."
With the introduction of this fund, Ryada hopes to benefit from building demand for Islam-friendly investment vehicles, as Muslims seek to park their funds in investments that correspond to their beliefs. Barclays Capital is also reportedly at work on hedge funds that respect Islamic laws.
HSBC will hold all of the fund's assets ... the minimum subscription currently stands at $1 million.
Beth Gaston Moon is an analyst at Schaeffer's Investment Research.
Kuwaiti investment firm starting Islam-friendly fund
Posted Oct 22nd 2007 6:36PM by Beth Gaston Moon
Filed under: International markets, Products and services, Competitive strategy, Middle East, Private equity
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Reader Comments (Page 1 of 1)
10-22-2007 @ 7:07PM
Sheldon L said...
Interesting notion. Raises many interesting questions.
Would Teva Pharmaceutical, the largest generic drug maker in the world be considered Islam friendly because they allow for the most affordable medicine to be provided to the most people possible, OR would it be considered unfriendly because it is an Israeli company?
Maybe there would be a loophole for the company since a large part of the population is muslim?
If they would not consider the investment, does this become another form of blacklisting?
10-22-2007 @ 7:14PM
Sheldon L said...
Hedge funds depend on leverage. If they use leverage they are taking on (calculated) risk, but more than non-hedge funds. Seems like gambling to me. Furthermore, any amount of leverage is basically a loan so it contradicts the idea....or so it seems. They might create an Islam friendly investment fund - but definitely not a "hedge fund".