| 19 Jun 2008 |
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Dubai Multi Commodities Centre Authority Seeds Shariah Compliant Hedge Funds on Al Safi Trust Platform
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Dubai - Barclays Capital, the investment banking division of Barclays BankBarclays Bank
PLC, and the Dubai Multi Commodities Centre Authority (DMCC)Dubai Multi Commodities Centre Authority (DMCC), an agency of the Dubai government, today announced the first Shariah compliant hedge funds to be launched on the Al Safi Trust alternative investment platform.DMCCDMCC
has committed to seed five commodity hedge fund managers on Al Safi with $50 million each, a total of $250 million, for a Shariah compliant fund of funds product to be offered under the Dubai Shariah Asset Management (DSAM) brand. The commodity strategies and hedge fund managers approved by DMCCDMCC
are: - Tocqueville Asset Management Gold
- Lucas Capital Management LLC Energy/Oil & Gas
- Zweig-Dimenna Intl. Managers Natural Resources
- Ospraie Management Agriculture
- BlackRock, Inc. Global Resources and Mining
Al Safi is a comprehensive Shariah compliant platform comprised initially of single strategy alternative investment managers with Shariah Capital as the Shariah advisor and Barclays Capital as the prime broker and structured product distributor.
Designed as a "plug and play" solution, Al Safi offers an established process of due diligence and accepts only those hedge fund strategies and managers that meet the exacting criteria of its Shariah Supervisory Board and the high standards of Barclays Capital. Al Safi delivers Islamic investors the same high-quality managers and strategies available to conventional investors including comparable returns, competitive fee levels, diversification across asset classes and access to customised structured products which can provide full capital protection -- all within a pre-established Cayman trust framework.
Al Safi has been created in response to market demand for Shariah compliant alternative investments and the considerable impediments fund managers have faced meeting that demand.
In addition to the above commodity fund managers, other long/short equity hedge fund managers available on the Al Safi platform will be announced shortly. The Al Safi platform expects to include a range of alternative investment strategies as well as specialised investment funds.
Richard Ho, Head of Fund-linked Derivatives at Barclays Capital said, "The DMCCDMCC's provision of seed capital for five fund managers on Al Safi is a strong affirmation of the robustness of the platform's Shariah framework and an exciting development in the alternative investments available to Islamic investors."
Ahmed Bin Sulayem, Executive Chairman, DMCC said: "DMCCDMCC is pleased to work with globally renowned organisations Barclays Capital and Shariah Capital to offer the first Shariah compliant hedge funds on the Al Safi Trust alternative investment platform. We have worked closely with our international partners to engage world-class fund managers with excellent track records in order to offer investors premium Shariah-compliant investment solutions."
Eric Meyer, Chairman and CEO of Shariah Capital, added: "With the capital support of a sovereign government and the prime broker and structuring expertise of Barclays, the Al Safi Trust platform is an historic development that unites modern investment strategies with Shariah. The initial commodity hedge fund managers who will be available through Dubai Shariah Asset Management are truly world-class. They represent the best and most successful commodity strategists in the world; and they have agreed to accommodate Shariah within the strict guidelines established by our Shariah Supervisory Board".
Russell Lucas, Co-Founder and Co-Portfolio Manager of Lucas Capital Management said: "As Al Safi is built from the ground up with upon compliant assets and is controlled within a credible Shariah framework in a way that is easy for us fund managers to interface with, it is a great one-stop solution and Lucas Capital is looking forward to managing money for the DMCCDMCC through it".
Dan Rice, Managing Director and Portfolio Manager for BlackRock said, "The Middle East is a fast growing market, with estimated investment assets of more than $3 trillion. BlackRock has already made strong progress in the region building extensive relationships, and we are excited to further deepen our presence in this area. We look forward to partnering with the DMCCDMCC, creating an attractive platform of investment opportunities for the Islamic investor".
John Hathaway, Portfolio Manger and Senior Managing Director of Tocqueville Asset Management L.P. said, "This is an exciting opportunity for Tocqueville and we look forward to a partnership with the DMCCDMCC with the greatest enthusiasm".
Dr. David Rutledge, Chief Executive of DMCC commented, "The Al Safi platform is ideal for the Shariah compliant asset management capability we are developing in commodities. It enables us to access exceptional managers with strong track records in order to achieve our goal of delivering diversified exposure across a range of commodity sectors to both institutional and individual investors interested in Shariah compliant investment products and solutions. We are privileged to seed these initial managers and support Barclays Capital with our commitment to the platform's success".
- Ends -
Noted to Editors: FAQ
What is Al Safi?
Al Safi is an independent, Cayman-based alternative investment platform designed for selected Shariah compliant hedge fund strategies. Initially, Al Safi will offer both commodity and long-short equity hedge fund investment strategies to investors. Other long-short equity hedge fund managers will be announced shortly. Private equity and real estate will be added in due course.
What advantages does Al Safi give to a hedge fund manager?
For the hedge fund manager, Al Safi is a turnkey solution that provides portfolio screening and related Shariah solutions for hedge funds which enable managers to operate within Shariah while remaining consistent with their existing investment strategies. Through the prime brokerage resources of Barclays Capital and with the oversight of Shariah Capital, along with the guidance of the internationally-recognised Shariah scholars comprising its Shariah Supervisory Board, Al Safi tracks each trade and each position of every manager through separately managed accounts in order to ensure Shariah compliance. In addition, prime brokerage provides reporting transparency to the manager through conventional account statements and to the investor through an annual re-certification issued by the platform's Shariah Supervisory Board. As a 'plug and play' solution, Al Safi enables investment managers to deliver performance in a Shariah compliant framework without being distracted from their asset management responsibilities.
What advantages does Al Safi provide to the Islamic investor?
For the Islamic investor, Al Safi offers credibility and integrity. It has an established process of due diligence and accepts only those strategies and managers which meet the exacting criteria of its Shariah Supervisory Board. Al Safi delivers Islamic investors the same high-quality managers and strategies available to conventional investors, including comparable returns, competitive fee levels, diversification across asset classes and access to customised structured products which can provide capital protection - all with Shariah oversight and reporting.
How does an investor invest in the fund on Al Safi?
Access to the five commodity-linked strategies seeded by the DMCCDMCC will be available shortly through a new fund offered by Dubai Shariah Asset Management (DSAM). Investment into other Al Safi long-short strategies will be available through fund-linked derivatives (structured products) offered through Barclays Capital. In addition, these investments can be customised to fit the individual's unique risk/return profile, in one fund, a fund of funds.
What is the size of the Shariah investment market? What is the size of the hedge fund market?
- Within ten years, 62% of Muslim investors will be invested in Shariah compliant products (Source: Dubai International Financial Centre)
- The Islamic Finance industry is worth around US$700 billion (Source: Moody's Investor Services estimated in a February 2008 report)
- Institutional investors are to more than double their investments in alternatives to around $11 trillion by 2011 (Source: Merrill Lynch and Casey Quirk December 2007 report)
Who controls Al Safi?
Al Safi is independently controlled and built around independent service providers:
- The internationally-recognised law firm, Walkers Fund Services Limited (Cayman Islands) is the trustee responsible for the overall management of Al Safi
- Barclays Capital is the prime broker and structured product provider to Al Safi
- Shariah Capital, Inc. is the Shariah Advisor
- Citco Fund Services (Dublin) Limited is the administrator
How does Al Safi's fee structure compare to non-compliant funds?
Its fees are very competitive. There is no premium charged for Shariah compliance by any of the hedge funds on Al Safi beyond the transparent infrastructure costs charged at the fund level.
Is there a limit to the number of hedge funds on the Al Safi platform?
No. The platform is open-ended and can accommodate any number of funds and investment vehicles.
Can it accommodate other types of investment funds?
Although hedge funds are Al Safi's initial focus, the platform can also accommodate 130/30 exposures, long only mutual funds, real estate funds, sector specific funds in areas like technology and healthcare, and private equity, provided they are managed within Al Safi's Shariah guidelines.
Why is Al Safi unique?
Al Safi provides a "one-stop" solution for both investment managers and investors. Hedge fund managers appreciate that all of the prime brokerage, administration and Shariah compliance functions are provided on one platform in a turnkey solution. An investment manager then can concentrate strictly on managing his portfolio. Investors appreciate Al Safi because of its flexibility and "open architecture" that allows investors to pick and choose those fund strategies that best suit their investment requirements.
What investors will find Al Safi attractive?
Al Safi is suitable for both institutional and individual investors looking for Shariah compliant, absolute return investments. It is ideal for financial institutions and investment firms looking to structure an offering of diversified, Shariah compliant hedge funds into a separate "white labeled" product, distributed under their own brand names. By taking advantage of Barclay's structured products capabilities, treasuries and institutional investors can have access to principal protected notes and other instruments for the effective management of balance sheet risk and liquidity.
How is the platform Shariah compliant?
Al Safi has been affirmed as Shariah compliant by a fatwa issued from its Shariah Supervisory Board on 9 May 2008. This fatwa confirms that the proposed investment strategies, investment techniques and expected equity holdings will meet the strict Shariah guidelines established by the Shariah Supervisory Board.
Who are the scholars on Al Safi's Shariah Supervisory Board?
The Shariah Supervisory Board is made up of leading scholars in Islamic Finance, drawn from Bahrain, Malaysia, the United States and the UAE. These scholars are:
Dr Mohamed Daud Bakar (Malaysia) - Dr Bakar was an Associate Professor in Islamic law at the International Islamic University Malaysia. Currently, he is the Chief Executive Officer of the International Institute of Islamic Finance. His areas of specialisation include Islamic Legal Theory and Islamic Banking and Finance. Dr Bakar is a member of many international Shariah boards, including Morgan Stanley, Dow Jones, Bank of London and the Middle East, the Securities Exchange of Malaysia and others. He also is a member of the AAOIFI Shariah Board.
What checks are in place to prevent a fund manager from pursuing a non-compliant strategy on Al Safi?
Shariah Capital, Barclays Capital and Citco each review all Al Safi accounts on a daily basis. Barclays Capital generates a daily "Exception Report" that identifies any trade or security not included in the platform's approved investment universe. Shariah Capital then contacts the manager to reverse the trade or eliminate the position, ideally before settlement.
Why is conventional short selling disallowed in Islamic Finance?
Conventional short selling is unacceptable in Islamic Finance because Shariah Law prohibits an investor from selling something that he does not own. Under Shariah, an investor cannot borrow shares from a brokerage house or bank and sell them in the market for an eventual gain.
How have you enabled the same results of short selling on Al Safi?
Under the guidance and approval of Al Safi's Shariah Supervisory Board, different mechanics for the transaction have been developed. This process establishes ownership before the sale of the asset to the market. In order to accomplish this, a classical Shariah commercial model, known as the Arboon sale, has been used. Then while the mechanics of the sale may be different, the economics of the transaction are the same as a conventional short sale.
How does this Arboon sale work practically with the Prime Broker?
When a hedge fund manager wants to short a stock on Al Safi, his trader puts an order through to Barclays Capital Prime Brokerage, much the same way he normally would place such an order. The difference is that, on Al Safi, Barclays Capital Prime Brokerage facilitates the transaction as a purchase, not as a loan. This is done without any administrative impact on the hedge fund manager or his portfolio. The result is that conventional hedge fund managers, using these tools, can manage Shariah compliant. They do not need to change their investment styles or procedures because Barclays ensures that the contracts underlying the transactions are Shariah compliant.
Al Safi hedge fund managers cannot short stocks in the conventional manner, using conventional contracts to borrow stocks. They cannot borrow shares from another bank or prime broker. Instead, they must order their short sales through Barclays Capital as it has the Arboon-based mechanism to achieve the same economics as a conventional short sale, but within the legal requirements of Shariah law.
How significant is the Al Safi Trust for Islamic Finance?
This development breaks new ground for Islamic investors and opens up an entirely new asset class of alternative investments for them. Given the limited set of risk management tools presently available to Islamic investors, Shariah compliant hedge funds are a very important development for the industry. The time, expense and legal expertise required to achieve the Al Safi Trust solutions have been considerable. The Al Safi Trust is unique and innovative, offering investors valuable flexibility and transparency not otherwise available in the alternative investment space.
Does Al Safi provide Islamic investors with parity to conventional investors in hedge fund investments?
Yes. Until now, the hedge fund industry has not had the methodologies to comply with Shariah and was therefore unable to offer an investment product to Islamic clients. Now, through Al Safi, a number of products will be made available to investors who insist on Shariah compliance. Al Safi places Islamic investors and conventional hedge fund investors on a level playing field.
In fact, there is greater transparency and, therefore, better risk management for Al Safi investors compared to conventional hedge fund investors. For Shariah compliance purposes, all Al Safi portfolios must be in separately-managed accounts so each trade/each position can be reviewed. Conventional hedge funds typically do not offer this level of transparency and scrutiny.
What is the Dubai Multi Commodities Centre Authority's (DMCCDMCC
) relationship with Al Safi? DMCCDMCC
, through its Dubai Commodities Asset Management (DCAM) affiliate, is partnering with Shariah Capital to form Dubai Shariah Asset Management (DSAM). DMCCDMCC has committed to seed five commodity hedge fund managers on the Al Safi platform with $50 million each, a total of $250 million, for a Shariah compliant fund of funds product to be offered under the DSAM brand. DMCCDMCC effectively is the seed investor of the Al Safi platform. The initial managers funded by DMCCDMCC will be available to investors exclusively through DSAM.Who is Barclays Capital?
Barclays Capital is the investment banking division of Barclays BankBarclays Bank
PLC which has an AA long-term credit rating and a balance sheet of over £1.2 trillion. With a distinctive business model, Barclays Capital provides large corporate, government and institutional clients with solutions to their financing and risk management needs. Barclays Capital has offices in 29 countries, employs over 16,200 people and has the global reach and distribution power to meet the needs of issuers and investors worldwide. For further information see the website at www.barclayscapital.comBarclays Capital - the investment banking division of Barclays BankBarclays Bank
PLC. Registered in England 1026167. Registered office 1 Churchill Place, London, E14 5HP. Authorised and regulated by the Financial Services Authority and a member of the London Stock Exchange.What is the Dubai Multi Commodities Centre (DMCCDMCC
)?DMCCDMCC
was created in 2002 as a strategic initiative of the Dubai Government to establish a commodity marketplace in Dubai. Rated 'A' by Standard & Poor's, it provides the market infrastructure that brings together a wide range of commodities activities, and is committed to serve the needs of participants in the gold, diamonds and commodities markets. Resident companies of DMCCDMCC are offered highly attractive benefits under a free zone status, including a 50-year guaranteed tax holiday, 100 per cent business ownership, full ownership of business premises, and a secure regulated environment. For further information see the website at www.dmcc.ae Who is Shariah Capital?
Shariah Capital customises Shariah compliant financial products and platforms and provides selective Shariah consulting and advisory services primarily to global financial institutions and investment firms with product initiatives directed to Islamic investors. Headquartered in the United States, Shariah Capital is traded on the Alternative Investment Market (AIM) of the London Stock Exchange under the symbol SCAP. It reports to the Financial Services Authority (FSA) in the United Kingdom and is registered and licensed with the Dubai International Financial Centre (DIFC) in Dubai where it maintains a branch office. www.shariahcap.com
About Dubai Shariah Asset Management (DSAM)
DSAM is a newly-formed partnership between Dubai Commodities Asset Management (DCAM), a wholly-owned division of the Dubai Multi Commodities Centre Authority, and Shariah Capital. DCAM has applied to the central bank of the United Arab Emirates for a license that will authorise it to develop, seed and distribute commodity-linked investment products in the UAE and other markets.
About the Approved Managers
New York- based Tocqueville Asset Management oversees approximately $6.3 billion for wealthy families, institutions, and mutual funds. The core investment philosophy is contrarian value and the strategies employed are primarily long only. Gold-based strategies account for approximately $1.4 billion of assets under management, making Tocqueville one of the largest managers in the gold and precious metals sector. Tocqueville launched their gold fund 10 years ago as a natural outgrowth of their contrarian investment principles. Portfolio manager, John Hathaway has over 37 years experience in the investment business including 30 as a portfolio manager. www.tocqueville.com
Lucas Capital Management, with over $1.5 billion under management, won the MAR Hedge Sector Fund of the Year Award for two consecutive years, in 2005 and 2006. Co-Portfolio Manager Russell Lucas and his family represent a continuum of asset management for three generations dating back to 1934, and energy income investments since 1975. www.lucascapital.com
Zweig-Dimenna International Managers, Inc.
Zweig-DiMenna International Managers, Inc. was named the 2007 Fund of the Year and won the Absolute Return Award for its International Fund. The firm's total AUM exceed $4.0bn. Martin Zweig and Joseph DiMenna formed the first Zweig-DiMenna partnership in 1984 and are considered one of the earliest firms in alternative investments. www.zweig-dimenna.com
Ospraie Management LLC
Established in 1999 and headquartered in New York City, Ospraie Management, LLC is a leading investment management firm with over $9 billion under management, focused exclusively on commodities and basic industries. Ospraie combines in-depth industry knowledge with financial expertise and a long-duration perspective to identify and execute on attractive opportunities in its investment universe. www.ospraie.com
BlackRock is a publicly-traded company (NYSE:BLK) with over $1.4 trillion assets under management. It is owned 49% by Merrill Lynch, 34% by PNC Bank and the remainder by employees and the public. It employs 5,500 people in 19 countries, including more than 700 investment professionals. Managing Director and Portfolio Manager Dan Rice is a 19-year veteran of BlackRock. Managing Director and Portfolio Manager Denis Walsh has been named a "Best of the Buy Side" analyst by Institutional Investor magazine 7 times in the last 8 years, 2000-2008. www.blackrock.com
For more information please contact Corporate Communications:
Europe: Barclays Capital
Daniel Hunter
Tel: +44 (0)20 3134 2195
Email: daniel.hunter@barcap.com
Will Bowen
Tel: +44 (0)20 7773 3250
Email: will.bowen@barcap.com
Americas: Barclays Capital
Kristin Friel
Tel: +1 212 412 7521
Email: kristin.friel@barcap.com
AsiaPac: Barclays Capital
Jonathan Williams
Tel: +65 6308 3490
Email: jonathan.williams@barcap.com
MENA: Dubai Multi Commodities Centre
Sudha Chandran
Tel: +971 4 367 8382
Email: sudha.chandran@dmcc.ae
© Press Release 2008
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