Gulf investment funds prepare for take-off

23 September 1994

A variable capital investment fund is to be launched on the Bahrain Stock Exchange on 25 September by Bahrain Middle East Bank (BMB). It is the first such fund to be listed in Bahrain. Other investment vehicles are in the pipeline elsewhere in the GCC, including an equity fund planned for listing on the Kuwait Stock Exchange by The International Investor (II).

The Proinvest BMB fund is structured around a closed-end company with variable capital. Proinvest BMB has $60 million authorised capital but this can be increased as the fund grows, BMB's chief executive Albert Kittaneh says. BMB will act as management company and will market the units, with net asset valuations to be audited by KPMG Fakhro. BMB is a Manama-based offshore bank, owned by Kuwaiti, Bahraini, Saudi and UAE institutions and investors.

The fund will invest a minimum of around 50 per cent of its portfolio in diversified global equities and a maximum of 25 per cent each in fixed income portfolios and in currencies, derivatives, commodities and futures. It will be quoted on the Bahrain Stock Exchange and open for investment by GCC nationals and resident foreigners. The minimum investment is $10,000.

Bahrain does not yet have the legal framework for variable funds modelled on European unit trusts, but existing structures are being modified to allow for a wider range of investment instruments. 'We had to play with whatever is around to structure a fund which is innovative in every way,' Kittaneh says.

The Kuwait-based II's planned equity fund will be listed on the Kuwait Stock Exchange, Basil al-Ghalayini of II's London office said on 12 September. It will invest in stocks that are acceptable on Islamic grounds - in practice all but commercial banks and insurance companies quoted on the Kuwait market - and will be open to non-Islamic investors.

II is also working on plans for an emerging markets equities fund and might itself seek a listing within the next two years, Al-Ghalayini said.

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