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Sun 27 May 2007 07:03 PM

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Islamic oil funds launched

Banks in Bahrain and Abu Dhabi set up $150 million worth of crude oil Islamic investment funds.

Bahrain-based Islamic investment bank Gulf Finance House and Abu Dhabi Investment House (ADIH) have launched two crude oil investment funds that comply with an Islamic ban on the receipt of interest, the companies said in a joint statement.

The funds, with a total value of $150 million, will allow Islamic investors to participate in the oil market, the statement said. It did not give further details on how the funds would invest the money.

Investment funds around the world have poured billions into commodities markets, including the crude market. Fund money helped fuel a bull run on crude that saw prices triple from early 2002 to 2006.

Increasingly, funds view commodities, which can perform well when other assets perform badly, as an essential ingredient for diversifying a portfolio.

"The funds will offer investors an opportunity to participate in the oil market through one of the first financially engineered crude oil Islamic investment funds," said ADIH Chief Executive Rashad Janahi in the statement.

"Our clients have expressed a strong interest in investing directly in the crude oil market and this product does exactly that," he said.

The first fund is a $100 million investment that will target a total return of 20% over two years, the statement said. The fund provides 90% capital preservation.

The second is a higher risk $50 million fund with no capital preservation, targeting total return of 40% over two years.

Both funds have been approved by the Central Bank of Bahrain.

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