Faysal Islamic Bank of Bahrain (FIBB) will start marketing for an open-ended Islamic equity investment fund in September, when potential investors return from their summer holidays.

'We wanted to start it on 15 June but this didn't give us a good enough window,' says Mohammed Tariq, FIBB's senior vice-president for investments, capital markets and treasury. The fund will target global markets, focusing on those which offer liquid investments - Middle Eastern stocks are not on the menu because of a relative lack of liquidity.

'We're going into well-established, liquid companies. We'd rather have lower returns, but a more reliable performance,' Tariq says.

'There's no particular benchmark like the Morgan Stanley Capital Index (MSCI). It'll be a bottom-up approach (looking at particular companies) rather than a country weighting of x per cent.' FIBB was approached by international institutions which wanted to develop Islamic investment vehicles in partnership with it, but decided to go it alone, Tariq said. The bank is in the process of selecting a number of asset managers in different markets.

Tariq said the fund's Sharia criteria had not been precisely determined yet, though it would be likely to set a maximum target for the amount of borrowing a company can have in relation to its assets for the fund to invest in it. Interest earnings would be 'purified' - stripped out of returns to investors and paid to charity.

Debate is still going on over the question of what is or is not an Islamically acceptable investment. The traditional view has been that Muslims should not invest in a company that borrows at interest or has interest earnings, but some Sharia scholars have started to take a more pragmatic view. As a result, the last few months have seen a proliferation of new Islamic funds developed by Gulf or Western institutions.