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Alternative construction
01 June 2009
Islamic alternative investment products have grown gradually in the recent past. Among these alternatives, hedge funds have proven to be the weakest link. Dr Humayon Dar investigates why hedge funds are so weak in this region and what alternative investment products are popular.
Devout Islamic investors have by and large kept themselves at bay from hedge funds. Consequently, most managers of full-fledged Islamic banks shy away from investing their proprietary money in hedge funds and get additionally nervous on the prospects of having to sell an Islamic hedge fund.
The performance of Islamic hedge funds has also not helped to change this negative attitude towards this asset class. The most widely publicised success story of Islamic hedge funds is related to the Al Fanar Islamic hedge funds, managed by the US fund management company Permal (and seeded by Saudi Development and Economic Company – SEDC0). Their performance, however, remains at best mediocre. Although the four Islamic hedge funds launched by Dubai Shariah Asset Management (DSAM) – a joint venture between the US-based Shariah Capital and Dubai Multi Commodities Centre (DMCC) – have done fairly well since their launch last year, they have not...
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