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Shar’ia-Compliant Private Equity Funds

by Siobhan Brewster

  • 24 Mar 2010
  • PE

Preqin’s research reveals that the number of Shar'ia-compliant private equity funds is growing, with an increasing number of fund managers, particularly in the Middle East, raising private equity funds that comply with Islamic law.  Islamic law prohibits the charging or paying of interest and investment in certain, forbidden industries (such as gaming and alcohol) among other things. A Shar'ia-compliant investment policy may include some or all of these regulations.  

Since 2007, only 20 Shar'ia-compliant funds have closed raising an aggregate USD 4.6 billion. This is less than one-third of the capital currently being targeting by Shar-ia-compliant funds on the road. There are currently 23 Shar'ia-compliant private equity funds on the road targeting an aggregate USD 15.8 billion. Three-quarters of these funds are being raised by fund managers based in either the Middle East or North Africa, while 17% are being raised by firms based in Europe, 10% by firms based in Asia and just 2% by firms based in North America. Three UK-based fund managers are currently raising Shar'ia-compliant private equity funds, they are Lewis Charles Securities, CR Property Advisors and Socrates Capital.

One of the largest private equity firms that raises Shar'ia compliant private equity funds is Abraaj Capital. The firm has over USD 5 billion in assets under management and in 2007 it closed its first Shar'ia-compliant infrastructure and growth capital fund on USD 2 billion. Abraaj Capital is currently raising its first Shar'ia-compliant buyout fund, which is targeting USD 4 billion. Approximately 30% of Shar'ia-compliant private equity funds are targeting more than USD 1 billion. This figure is significantly larger than the 10% of private equity funds on the road that are targeting in excess of USD 1 billion.

For more information on private equity fund managers, please see Preqin's Fund Manager Profiles.

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