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Deutsche Bank to launch sharia hedge fund range

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Points of Essence:

  • Deutsche Bank AG is poised to launch an advisory unit on shariah compliant hedge funds which will offer techniques for existing hedge funds to adopt Islamic investment rules alongside their current investments.  This is following the launch of the similar platforms by Barclays Capital’s Al Safi and Newedge, the broker joint venture of Credit Agricole’s Calyon and Societe Generale.
Deutsche Bank's headquarters in Franfurt. (Getty Images)
BANK’S FORT: Deutsche Bank’s headquarters in Franfurt. (Getty Images)

By Cecilia Valente

Deutsche Bank AG’s prime brokerage business is preparing to launch a sharia-compliant hedge fund platform within the next month, as part of its Middle East expansion plans, a senior official said.

Deutsche Bank will expand an existing service on a selective basis, regional head for Middle East Structuring Geert Bossuyt told newswire Reuters, and the platform – or range of financial products – will offer techniques for hedge funds to adjust to Islamic investment rules.

“It is a bit like the case of the chicken and the egg, you will never have demand if there is no offer. So Deutsche Bank, and others, offer product,” he said.

Deutsche will target existing hedge funds who want to run sharia strategies alongside their ongoing investment activities. It will follow the launch of Barclays Capital’s Al Safi sharia-complaint range in June and the launch last year of a similar product by Newedge, the broker joint venture of Credit Agricole’s Calyon and Societe Generale.

Sharia-compliant transactions demand transparency throughout the investment process. Short selling is banned because it amounts to selling an asset not owned and risk management must accommodate the exclusion of certain types of derivatives because of their speculative nature.

Bossuyt said the platform will offer “conceptual solutions” to hedge funds, advising on techniques to replicate traditional shorting, as well as screening of underlying equity and derivative transactions.The service has been approved by the sharia board of investment company Dar Al-Istithmar, which is 55 percent owned by the German financial group.

The Islamic hedge fund industry is still at least two years away from reaching the tipping point where the product offering is large and sophisticated enough to make costs and returns very similar to its mainstream counterpart, Bossuyt said.”My estimate of the immediate flow is that it is not going to be great at the beginning. We are in a learning-curve phase,” he said. (Reuters)


Written by Suapi Shaffaii

September 26, 2008 at 12:54 am

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