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Money managers under the microscope

No “Inshallah” for hedge funds

March 30, 2010

Islamic funds may well be ”the most dynamic part of the Sharia-compliant sector”, supported by with increasing interest from  deep pocketed investors,  but if you are a hedge fund manager,  Banque Sarasin reckons you have no hope of getting a slice of this Sharia pie.

The Sarasin Islamic Wealth Management Report 2010 says many Islamic investors cannot be persuaded hedge funds are linked to the real economy (one of the tenets of Islamic finance), plus investors are discouraged by short selling which, strictly speaking, is also prohibited.

And before you hedgies say you know a Sharia scholar or two who is comfortable with signing off a fatwa, the necessary backing to any Islamic product,  Sarasin says the “forbidden” label still sticks to hedge funds — “effectively stopping the development of this sector”.

“Despite efforts since 1997, the sector remains small. To date, there does not appear to be an Islamic hedge fund which has substantial assets under management.

“Due to this, and the uncertainty regarding hedge funds in general, substantial investment in this field is not expected in the short term,” the report says. Period.

Islamic investors are currently going long-only instead. For the time being  at least there is little “inshallah” for hedge funds.

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