The fund will invest in assets worldwide. The market for such funds is expected to reach $50,000 million by 2010 and grow at 10-12 per cent a year, according to Pantera.
“There is a demand for sharia-compliant hedge funds and investors have asked us to prepare a fund,” says Florence Eid, partner and head of Middle East and North Africa at Pantera.
Demand is coming from family-owned businesses and big investors who have a history of investing in conventional vehicles but would rather invest in a sharia-compliant manner.However, there is an ongoing debate about whether hedge funds can be sharia-compliant, because of their use of strategies such as short selling, which involves selling a security that the seller does not own.
“Are hedge funds really sharia in spirit? I do not think so,” says Fares Mourad, director and global head of Islamic investment at Credit Suisse.
Existing sharia-compliant hedge funds have less than $1,000 million in assets under management.
Demand for alternative investments in the region, including non-sharia-compliant hedge funds, is growing. Pantera says the value of the GCC investor base will increase to $140,000 million in 2010, up from $28,900 million in 2005, and will account for 14 per cent of all institutional investment in hedge funds.