Islamic Banking

Shariah Fund of Funds Created

Bob Reynolds, 22 May 2007

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The Kuwatit-based Global Investment House has initiated the first global Shariah fund of funds. The Global Islamic Fund of Funds, an open-ended fund of funds investing in local and international Shariah-compliant funds, was introduced last week.

The fund’s objective is to provide long term capital appreciation with reduced risk by investing in a diverse basket of Shariah-compliant funds and instruments. The fund’s strategy is to invest the majority of its assets in a core of carefully selected Islamic funds that complement each other in risk and return.

The fund will also invest in low risk instruments to reduce the overall volatility of the portfolio. Global has teamed up with Al Rayah Consultancy to review and confirm that all the underlying managers comply with the Islamic Shariah laws.

Global aims to diversify its exposure in the global markets to minimise the risks associated with any one market as well as setting risk parameters to ensure that the fund is not overly exposed to any one market or sector. Additionally, the fund may invest in all types of funds similar -but not limited- to equity, real estate, hedge funds and private equity funds compliant with the Shariah law.

There are now more than 300 Islamic financial institutions operating in 75 countries with combined assets exceeding $300 billion, and an annual growth rate of 15 per cent. Additionally, Islamic funds assets have had a rapid growth in the past decade, with a significant amount attributable to the growth of the GCC stock markets.

The fund’s minimum subscription is $25,000 with a monthly subscription frequency and quarterly redemptions after the lock-up period.

Global has been tracking Islamic fund managers for over five years and has extensive experience in the Islamic financial markets which has resulted in the launching of three Islamic Real Estate Funds; Global GCC Real Estate Fund, Global US Real Estate Fund and Global Asia Real Estate Fund along with a range of Equity funds such as Al-Durrah Islamic Fund and Global Islamic GCC Large Cap Fund, as well as a Money Market fund, Global Islamic Fund.

The fund’s investment breakdown involves three areas and includes real estate funds, mutual funds and fixed income.

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