FIBB launches equity fund with BNP

03 December 1999
FINANCE

Faysal Islamic Bank of Bahrain (FIBB) has launched an Islamic equity fund which it says is the first of its kind to offer investors such a high level of capital protection. FIBB has outsourced management of the fund to Banque Nationale de Paris (BNP). 'It's part of a strategy to launch a series of equity funds,' says FIBB vice-president for investment banking Khalid Nazir. He says the next two funds will target Europe/Asia-Pacific and technology respectively and FIBB is already in advanced talks with potential partners.

The open-ended, capital protected Faysal Shield Fund was launched on 24 November with seed capital of $25 million from FIBB. The initial subscription period closes in late December with a target of at least $50 million, which Nazir expects to be exceeded comfortably. 'There's tremendous interest in protected products in the Arab world and it's the first product of its kind,' he says.

As a global equity fund, the portfolio will have about a 60 per cent weighting in US stocks, reflecting the current strength of US markets. All have been screened to ensure sharia compliance. 'A large portion of the fund is invested in well-rated, low risk murabaha,' says Nazir. However, he adds that the fund offers a wide choice of risk/reward profiles to appeal to both cautious and adventurous investors.

The feature of the fund that FIBB expects to appeal strongly to investors is the capital protection of 90-100 per cent on an annualised basis. The fund also offers six months liquidity and the level of capital protection can be adjusted half yearly. It will make its first pay-out in June 2000. Toby Lanyon, vice-president at BNP Bahrain, says the non-option guarantees devised for the fund are unique.

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