Dubai says salaam to sharia-compliant hedge funds

The Al Safi Trust alternative investment platform is launched in Dubai featuring five commodities hedge funds that comply with sharia law.

A hedge fund platform has been inaugurated in Dubai which will offer a range of sharia-compliant hedge funds.

The platform, known as Al Safi Trust alternative investment platform, will start off with five commodity-themed hedge funds. The first funds on the platform are: Tocqueville Asset Management, with its gold fund; Lucas Capital management, offering energy/oil and gas; Zweig-DiMenna International Managers, with natural resources strategies; Ospraie Management handling agriculture; and BlackRock with global resources and mining.

The ancestors of today's hedge fund managers were mentioned in the Bible, (Matthew 21:12) but there is no mention in the Koran, and there were no known hedge fund managers operating in the seventh century. However hedge funds are not un-Islamic, and neither are the 2% management fees and 20% performance fees which each fund will charge here. Certain underlying assets can be un-Islamic, and so with these funds there is a screening process that will ensure their ongoing compliance with sharia law.

All of these hedge fund managers are based in New York, although there is no geographical restriction as to where managers can operate from for this platform. All are expressing their commodity views through long/short equity strategies. While these funds are newly established specifically for this platform, they are all strategies that each hedge fund manager has already been running.

Dubai Multi Commodities Centre Authority has seeded each fund with $50 million each, and a fund of funds product will be launched in due course. In the meantime, investors can select one or more of the underlying hedge funds on the platform and subscribe to units.

Shariah Capital will act as the sharia advisor and Barclays Capital will be the prime broker for all the funds and structured product distributor. Barclays has also helped to develop the platform and set up the trusts.

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