An Asiya statement said 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 USD 5 trillion to USD 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.
Filling financing gap
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 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 Islamic bonds, sukuks, which currently yield an average of 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, investment adviser to the fund and a Singapore-based trade finance operator. Together the partners have seeded the fund with USD 20 million.
Ahmad Al Hamad, group managing director of Asiya Investments, said: “The fund comes at a time of continued growth within the Asian continent as well as growing cross-border trade between the GCC and emerging Asia.”
Opportunities in Asia
Mohab Mufti, CEO, Asiya Investments Dubai, said: “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.”