‘A sukuk fund is on the radar,’ says Michael Klimek, Middle East head of asset management at Commerzbank.

‘We have got the green light from the German regulator but we won’t launch a product unless we find the right partner to distribute it in the region or, ideally, a few local partners.’

The sukuk product would be offered to institutional and high net worth clients and would mainly invest in sukuk listed on the Bahrain Stock Exchange.

Most sharia-compliant funds invest in equities. Globally, there are 146 Islamic equity funds compared with only 13 funds that invest in Islamic bonds. No institution in the region offers a sukuk fund.

The investment vehicle is restricted by the small number of listed Islamic bonds, a lack of trading in the secondary market and the absence of performance benchmarks.

‘There is not enough diversification in sukuk sectors,’ says Ahmed Abbas, chief executive officer of the Bahrain-based Liquidity Management Centre. ‘Some 90 per cent of sukuk are real estate. You are bound to one sector and there is actually no diversity in terms of tenors or ratings.’

Several other institutions are also believed to be considering launching sukuk funds.