Cairo-based Ridge Islamic Capital plans to launch the first dedicated Islamic fund of funds in the Middle East by the end of this year, with an initial capital base of $150 million, a company official said.
The Bahrain-domiciled fund will invest across a pool of sharia-compliant funds around the world; this is a rare format in the Islamic funds sector, which has focused on single-manager products.
Ridge Islamic, a unit of Angola-based Ridge Solutions, will contribute $15 million to the fund's capital, said Ahmed Abdel Ghani, executive board member and head of business development.
Islamic funds screen their portfolios under religious guidelines such as bans on tobacco, alcohol and gambling, in much the same way as socially responsible funds.
But the last few years have seen Islamic funds undergo a shake-out, with Western firms pulling out of the sector as it was hit by slumping equity markets and lukewarm investor interest. In the last two years, about 88 Islamic funds have been liquidated globally, mainly smaller and less viable ones.
The Ridge Islamic fund, which was initially slated to launch in June this year, will be U.S. dollar-denominated and use controls designed to limit risk, including exposure caps by country, sector and asset class.
The rules will allow up to 20 percent of the fund's net asset value to be allocated directly into sharia-compliant financial instruments; up to 40 percent of net asset value could go into cash and Islamic money market instruments.
The fund has a three-member sharia board with scholars from Egypt, Saudi Arabia and Bahrain. Ridge Islamic was created last year through the acquisition by Dubai-based Ridge Solutions International Holdings of Egyptian asset management firm El Rashad Holding.