Money managers under the microscope
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.
It’s hard enough for fund firms to get investors to put money into markets when stocks are so volatile, but it seems they’re also still having to wrestle with the bad publicity from U.S. financier Bernard Madoff’s giant fraud.
Ashraf Mohamed, portfolio manager and head of Islamic funds at investment firm Stanlib in South Africa, told the London leg of the Reuters Islamic Banking and Finance Summit that investors are still nervous of another Madoff.