Mar 11 2009

Slew of Shariah infrastructure funds to offer 18% returns

Regional fund managers expect the emergence of several new Shariah-compliant funds focused on infrastructure projects, which offer returns in the range of 15 to 18 per cent.

Mark Lemmon, CEO of The Mena Infrastructure Fund, said: "We see opportunities in basic infrastructure projects. That has become more evident as countries become less dependent on hydrocarbons for running their economy. Several Gulf countries in the region have set a vision for the next several years. And they are not expected to move away from them during the economic downturn."

Lemon said that he expects return on investments in infrastructure projects to stand at 15 per cent this year. "There are others who expect 18 per cent," he said.

Infrastructure projects in sectors like health, agriculture and green energy are expected to attract the bulk of investments.

Fund managers said that the involvement of governments in the projects is expected to serve both as boon and a curse as far as attracting investors is concerned. Infrastructure projects are in fact emerging as an asset class meaning that they will behave as group of securities that show proportionate behaviour in the marketplace. Of several financial instruments available today only equities (stocks), fixed-income (bonds) and cash equivalents (money market instruments) are considered asset classes.

Analysts said if there are bad performances in the infrastructure space, they have to come from firms listed. "We should be careful in distinguishing private equity from listed companies. The listed firms have had a direct impact of the recession," said Albert da Costa, Associate Director of Marjan Capital Private Limited.

By Shashank Shekhar

© Emirates Business 24/7 2009

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