DUBAI — Asiya Investments (Asiya), the Asia specialist investment firm, announced on Thursday the launch of its Asia Islamic Trade Finance Fund, which will invest in select, Shariah-compliant financing of short-term physical trade flows in Asia and the Middle East.
The Fund aims to capture a unique set of opportunities that exist in today’s market. Key among these is the expansion of both intra-Asia as well as cross-border trade flows between Asia and the Middle East. Annual intra-Asia trade is expected to quadruple from almost $5 trillion to $20 trillion by 2020. Similarly, trade between the GCC and emerging Asia is growing at a rate of 25 percent per year.
At the same time, a shortage of US dollar funding has emerged, particularly for medium-sized companies in Asia. The European banking sector, traditionally the largest provider of commodity trade finance, continues to deleverage in light of Europe’s slowdown and adjust to changes in bank capital adequacy rules under Basel III.
The Asia Islamic Trade Finance Fund seeks to fill this financing gap and in turn generate a steady stream of income based on Shariah principles. Its target return is double the rate of Zakat, equating to 5 percent, while providing investors the flexibility of quarterly liquidity. The Fund has been approved by a board of leading international and Gulf Shariah scholars who will supervise the Fund for on-going Shariah compliance.
The Fund targets annual returns of 5 percent, and offers investors quarterly liquidity at an attractive spread to Islamic money market “Murabaha” funds pay between 0.5 percent and 1.5 percent and also provides a stable alternative to multi-year Islamic bonds “Sukuks” which currently yield an average 3 percent.
Asiya Investments will manage the open-ended Fund through the firm’s recently launched Hong Kong investment management arm. It will do so in partnership with EuroFin Asia Group, the investment advisor to the Fund and a leading Singapore-based trade finance operator. Together, the partners have seeded the Fund with $20 million. Ahmad Al-Hamad, Group Managing Director of Asiya Investments, commented on the Fund’s launch: “The timing could not be better to introduce the Asia Islamic Trade Finance Fund. It comes at a time of continued growth within the Asian continent, as well as growing cross border trade between the GCC and emerging Asia. We are ideally positioned to participate in this growth. Our Hong Kong investment management team and EuroFin Asia have worked together, using their expertise and understanding of both the Asian markets and Shariah structuring, to develop a best-in-class offering to our investors.” Arab investors seek opportunities in Asia, said Mohab Mufti, CEO of Asiya Investments-Dubai, as he explained why he expects the Fund to be met with considerable interest across the Gulf.
“GCC investors are eager to step up their exposure to the growing Asian economies as many of them are currently under-allocated to the region. While they are intrigued by the opportunities, most are looking for ways to expand their exposure to Asia via lower risk strategies,” he said.
“Currently there is a shortage of opportunities which offer both attractive income streams and lower risk profiles, especially for those investors who require their investments to be Shariah-based.”
He also pointed out that many investors wish to invest “without having to lock up their capital for several years or concentrate their risks in the narrow Sukuk market.”
Sulaiman Alireza, Executive Director of Asiya Investments-Hong Kong, described how a solution to these investors’ needs was developed. “The Fund acts as an intermediary by lending, on a fully secured basis, to producers and traders with operations focused upon raw materials, commodities and semi-finished goods. – SG