Kleinwort Benson, the London-based merchant bank, has teamed up with Bahrain-based Islamic Investment Company of the Gulf (IICG) to launch an open-ended Islamic commodity investment fund which is intended to raise at least $25 million.
The Al-Meezan Fund will be domiciled in Dublin and denominated in US dollars. It aims to provide a 10-12 per cent annual return in the medium term through investment in physical commodities, initially commodities traded on the London Metal Exchange.
'We're looking to raise in excess of $25 million,' says Stella Cox, who heads Kleinwort Benson's Islamic banking department. A roadshow to promote the fund will go initially to the Gulf states and Southeast Asia. It will target institutional investors, although IICG may bring in some of its high net worth private clients.
The appeal of an Islamic commodity fund is that it can be targeted at commodities whose prices are moved more by fundamental factors of supply and demand than by speculation, which is frowned on as un-Islamic. 'The base metal market in particular is driven by cycles and supply and demand. We've found this has significant appeal for Islamic investors,' Cox said.
IICG will direct the sharia supervision of the fund. Its investment strategy will be based on Kleinwort Benson's proprietary commodity trading programme. Kleinwort Benson, which is owned by Germany's Dresdner Bank, was one of the first Western merchant banks to enter the field of Islamic finance in the 1980s. IICG is part of the Geneva-based Dar Al-Maal AI-Islami Group.