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Mon 22 Oct 2007 01:34 AM

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Ryada to launch Islamic hedge fund

Kuwait investment firm to combine demand for Islamic investments with the returns of hedge funds.

Kuwait-based Ryada Capital Investment Company on Sunday said it is launching a hedge fund that complies with Islamic law, in a bid to combine huge demand for Islamic investments with the returns of hedge funds.

Ryada Chief Executive Jamal Al-Saeed told Reuters the initial $100 million fund would target low risk investments, and keep short selling and other speculative bets on currency and stock movements to a minimum.

"There's huge liquidity in the region, and investors are looking for asset classes that comply with Islamic law, which can be low risk and allow for diversification of risk," Saeed said.

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.

"We will do limited short selling ... We have it there just in case we need it. Speculation happens, its human nature. But it's not the essence of the fund," he said.

Demand for Islamic financial products has boomed as more Muslims seek investments that comply with their beliefs.

Last month, Barclays Capital said it also planned to launch hedge funds that comply with Islamic law.

Saeed predicted strong interest in Islamic products that could deliver the kind of absolute returns - returns derived independently of wider market conditons - offered by hedge funds.

HSBC will hold all the fund's assets, and the minimum fund subscription is $1 million. Ryada aims to increase the fund's size to $300 million within three years.

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