The first sharia compliant hedge funds will be launched on the Al Safi Trust alternative investment platform by Barclays Capital, and the Dubai Multi Commodities Centre Authority (DMCC).
DMCC announced on Thursday it had committed to seed five commodity hedge fund managers on Al Safi with $50 million each, a total of $250 million, for a shariah compliant fund of funds product to be offered under the Dubai Shariah Asset Management (DSAM) brand.
Al Safi is a sharia compliant platform comprised initially of single strategy alternative investment managers with Shariah Capital as the sharia advisor and Barclays Capital as the prime broker and structured product distributor.
“With the capital support of a sovereign government and the prime broker and structuring expertise of Barclays, the Al Safi Trust platform is an historic development that unites modern investment strategies with sharia,” Eric Meyer, chairman and CEO of Shariah Capital, said in a statement.
The Al Safi platform expects to include a range of alternative investment strategies as well as specialised investment funds.
For many Islamic investors the world of hedge funds has been closed because many of them short - borrow and sell a security on expectation of buying it back at a lower price in the future.
Sharia law prohibits investors from selling something they do not own, but Shariah Capital has devised a method which allows a short trade to be replicated without the need to borrow a security.