Asiya Investments (Asiya), described as the Asia specialist investment firm, has announced 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 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 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 Gulf and international Shariah scholars who will continue to supervise the fund for ongoing 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, which pay between 0.5 percent and 1.5 percent.
It also provides a stable alternative to multi-year sukuk, 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 adviser 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 MD of Asiya Investments, said: “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.”
He added: “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.”
Mohab Mufti, CEO of Asiya Investments Dubai, 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. 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. In doing so, we have created a mechanism that not only allows our investors to participate in Asia’s growth, but also meets the specific requirements of Shariah. The Asia Islamic Trade Finance Fund addresses both a real business-related funding need and the objectives of Gulf-based investors who seek investments with attractive yields and lower volatilities and correlations than other assets, including equities and sukuk.”
Asiya Investments was established in 2005 as the GCC’s first Asia specialist investment company.
Since then, the firm has deployed more than $ 500 million in the developing Asian economies across a range of assets, including public and private equity, real estate and income producing strategies.
The firm concentrates on offering clients both investment opportunities and advisory services across Emerging Asia where population growth and accelerated urbanization are driving the expansion of domestic demand.
Key sectors for the firm include energy, real estate, infrastructure, financial services and consumer products.
Asiya also provides co-investment opportunities as well as research and advisory services on direct investments, acquisitions and joint ventures. In addition to its presence in Hong Kong, the firm operates Asiya Investments Dubai, its investment advisory arm, located within the Dubai International Financial Center. Both are wholly owned subsidiaries of the firm’s corporate office in Kuwait.