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Another Aim first

Created:
28 July 2008
Written by:
Malar Velaigam

The past week has been pretty eventful - think Max Mosley winning his 'Nazi orgy' privacy case, Labour's shock defeat in the Glasgow East by-elections, and Cristiano Ronaldo's really short shorts. But here in Smallworld we have been far more excited about the floatation of Family Shariah Fund, the first Shariah-compliant fund to come to Aim.

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"The launch of this fund is a catalyst for Islamic investment institutions to move forward," says an excited Abdulmohsin Al-Omran, non-executive director of the Family Shariah Fund and chief executive of Bahrain-based fund manager Family Office.

And he is probably right.

The Family Shariah fund was created to provide investors with a means to invest in a Shariah-compliant multi-asset class fund. Usually, Islamic funds either invest in the highly liquid murabahah products* , or in private equity and real estate assets, which are typically illiquid.

Mr Al-Omran wanted to combine both types of assets, while also operating under Islamic principles. He chose Aim because of its "daily liquidity" and because a new company without a historical track record cannot be listed in Gulf. He also wanted the fund to live up to Aim's standards on disclosure and transparency.

"Because we are not a private Shariah-complaint fund - of which there are many - investors can see how we get our net asset value and how we are performing," he says.

And this honesty is commendable. It is about time Shariah-complaint funds opened their books up to the public - how else will knowledge, understanding and mass take-up of the products be fostered?

The fund floated on 25 July after raising $31.55m (£15.9m) through a private placing of 31,549,999 ordinary shares at $1 each from high net worth individuals and families in the Gulf. The funds will be invested in a variety of asset classes including the money market, Islamic income and leasing (sukuks), equities, alternative investments, real estate and private equity. Being Shariah-compliant, the fund will naturally stay away from investing in anything related to non-Halal products, gambling, and alcohol. And investments will mainly be in geographies outside of the Gulf region.

Mr Al-Omran hopes that the fund will eventually be used as a benchmark for other Shariah-compliant listed funds. He says that a number of institutions have approached him to explore similar avenues.

That said, its worth noting that Mr Al-Omran worked on this fund for two years before it came to market. Although it might not take two years for the next Shariah-complaint fund to come to Aim, it will be some time yet.

Hopefully, Mr Al-Omran is right, and this will provide the much-needed impetus for Shariah-compliant investing to take off in the UK. After some disappointing false starts, and with the local Islamic banks concentrating on commercial banking activites, I was beginning to wonder when Islamic investing would actually become common practice in the UK - as it is in other Islamic banking 'hubs' in the world.

* Murabaha is a purchase and resale product with a mark-up. The capital provider acquires the desired commodity at a cost price from a third party and resells it at a predetermined higher price (which is the sum of the cost price and the profit) to the capital user thus providing an honest declaration of cost.

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