Barclays Capital plans to launch hedge funds that comply with Muslim law, the latest attempt to marry huge demand for Islamic investments with the returns of hedge funds. The British bank and its partner, US-based Shariah Capital, on Monday said they would offer investors a group of hedge funds that will be managed according to Islamic law, or sharia - rules which many bankers and investors say forbid common hedge fund strategies such as short-selling.
"The end-investor will buy a fund which has the exposure of six or seven long-short hedge funds. Those funds will be managed in accordance with sharia rules," said Harry Martin, co-head of Barclays Capital's Middle East market solutions group.
Unlike a fund of hedge funds, investors will be able to choose which hedge fund they have exposure to.
Islam forbids lending on interest and gambling, which many bankers say precludes short-selling, or selling an asset on the expectation that its price will fall, and other bets on currency and stock movements commonly used by hedge funds.
Martin declined to say how the hedge funds would comply with sharia, saying that was proprietary information.
Barclays and Shariah Capital plan to raise up to $500 million for the fund within a year in the United States, Martin said.
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