Shariah Capital Hedge Funds Bridge Investing and Faith

A New Canaan, Conn.-based hedge fund is hoping to attract observant Muslim investors who have, until now, avoided alternative investments whose tactics sometimes contradict teachings of the Q’ran, according to The Stamford Advocate. Shariah Capital Management, which derives its name from the term for Muslim law, seeks to tap into the trillion dollars of liquid wealth floating through the oil-wealthy Persian Gulf region by promoting funds that help their investors win big, without violating the laws of the Q’ran. The funds managing director, Joseph Gau, estimated that Gulf-region investors have about $350 billion and $400 billion worth seeking Islam-oriented financial opportunities. His company has been working with Islamic scholars for more than six years to get the right product mix. Southeast Asia and the Indian subcontinent offer potential for billions more of investment. When it comes to hedge funds, one problem is that Shariah prohibits selling something one does not own. Observant Muslims sometimes consider short-selling stocks as a violation of that rule. Likewise, the Q’ran prohibits paying and receiving interest, and undue speculation. Sheikh Yusuf Talal DeLorenzo helps put Shariah’s client’s consciences at ease as chief Shariah officer. As chairman of the Dow Jones Islamic Index and considered by many the premier Islamic finance scholar in the country, he helps engineer the firm’s products. Shariah Capital often works as a sub-advisor to other hedge funds or funds-of-funds. Often these funds create special, separately managed prime brokerage agreements through Barclays Bank, the terms of which include no provisions for interest or other forbidden elements. “We look at their portfolios and look at equity positions and we will be able to tell them in fairly short order if their strategy can be Shariah-compliant,” said Gau.  The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.