Qatar Islamic Bank SAQ, the Gulf state’s biggest lender complying with Muslim banking rules, is seeking to raise $200 million for a Europe-based fund that will invest in Islamic bonds, known as sukuk.
The EFH Global Sukuk Plus Fund will be operated by QIB’s European Finance House Ltd. unit in London, and managed by Aleksandar Devic, a former Lehman Brothers Holdings Inc. credit analyst.
“There has been a growing amount of interest in Islamic finance and sukuk as a direct result of the problems of the conventional banking system,” said Mark Watts, head of asset management at European Finance House. “When capital markets start to free up, we expect sukuk issuance to take off with a vengeance.”
Islamic financial institutions have been more resilient to the global financial crisis than their conventional counterparts because direct investment in subprime assets and their derivatives is banned under Shariah law, according to a report by Moody’s Investors Service last month. The Islamic banking industry will grow as much 15 percent this year after expanding an average 25 percent a year since 2006, Moody’s said.
Sukuk funds are typically backed by assets or cash flow to avoid the prohibited practice of paying interest. EFH’s fund will be offered to investors that aren’t restricted by Muslim banking rules.
EFH’s Luxembourg-based fund is targeting this year a yield of 6 percentage points more than the three-month London interbank offered rate for dollars, Watts said. The fund will buy sukuk with an average credit rating of A, the sixth-highest investment grade ranking in Standard & Poor’s scale.