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Tue 18 Oct 2011 05:10 PM

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HSBC’s Islamic unit says funds to exceed $10bn

HSBC Amanah plans to help set up more than 30 Sharia-compliant funds

HSBC’s Islamic unit says funds to exceed $10bn
Wealth from GCC investors will add more than $70bn to the Islamic fund universe

HSBC Amanah Securities Services, part of HSBC Holdings, will
more than double the value of the Islamic funds it services to exceed $10bn after
it helps to set up funds in the next 12 to 18 months.

Demand for Islamic funds has risen in the past three to six
months as the global economic slowdown prompted investors to seek alternative
investments to help manage risk, according to Germain Birgen, Luxembourg-based
global head of HSBC Amanah Securities. The unit will help set up more than 30
Sharia-compliant funds globally.

About $10 trillion was wiped from the value of global
equities in the third quarter amid concern a worsening European debt crisis will
derail global growth. Sharia law forbids gambling, investments in alcohol and
receipt of interest, so fund managers have to select investments deemed halal,
or permissible.

“Islamic funds are not exposed to the same level of
derivative techniques as conventional funds,” he said in a telephone interview
from Luxembourg today. “Conventional institutional managers, targeting
institutional investors such as pension funds or insurance companies, are
investing in socially responsible investments, which in most markets, Islamic
funds fall under that category,” he said.

HSBC Amanah Securities has received a growing number of
queries for Islamic funds from clients in countries, such as Australia, South
Africa and Brazil, he said. “One project coming from Brazil relates to a
private equity fund investing into farming, Brazil being one of the world’s
biggest exporter of halal meat,” Birgen said.

Wealth from investors in the Gulf Cooperation Council will
add more than $70bn to the so-called addressable Islamic fund universe by
2013, Ernst & Young MENA said last month.

“Increasingly, people are seeing the value in attracting the
world’s Muslim wealth with such funds,” Birgen said. “With the current size of
the industry, there aren’t enough funds.”

HSBC Amanah Securities services 90 funds in 12 domiciles
valued at about $5bn, a tenth of the Sharia-complaint fund industry, Birgen
said. Mature fund markets, such as Malaysia and Saudi Arabia, target mainly
local investors, he said. The new funds will help attract “large, conventional
players” worldwide.

The unit will help establish some of the funds in
Luxembourg, Ireland and Singapore, where regulations are more familiar to
international investors, he said.

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