Islamic finance should look to sukuk fund: Citi

DUBAI Thu Feb 18, 2010 10:05am EST

DUBAI (Reuters) - The Islamic finance industry needs to develop sukuk funds that pool liquidity, rather than ones just focused on distressed assets, a top executive at Citi Islamic Investment Bank (C.N) said on Thursday.

Sukuk funds are not a new concept, but they were created largely to snap up bargains through distressed asset purchases.

Samad Sirohey told the Reuters Islamic Finance and Banking Summit that once liquidity and confidence returned to the Gulf Arab region, the industry could consider creating a fund management concept.

That would see professional asset managers who have access to a certain volume of assets outstanding drawing players into an "institutionally driven Islamic securities market.

"Maybe you would have some banks set aside some liquidity to give it to a fund manager to manage on a sharia-compliant credit," Sirohey said. "Like a sukuk fund."

In September, Bahrain-based Islamic investment house Tharawat said it planned to raise $100 million by year-end for a sukuk fund it recently launched to snatch up bargains on the secondary market.

For this concept to take off, the industry would need a handful of players that would allocate money to a fund manager and allow it to be invested with sharia-compliant restrictions in place, Sirohey said.

"It would require a concerted industry-wide effort," he said. "In the medium-term that is what will take the market to the next level."

(Reporting by Shaheen Pasha and John Irish; Editing by Rupert Winchester)

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