Reuters – Hedge funds basing their investment strategy on sharia, or Islamic legal principles would face significant disadvantages compared with non-sharia hedge funds, some exponents of Islamic finance say.

Many strategies would be difficult to achieve because they would be too expensive to perform in a Sharia-compliant way, or because the tools themselves would be inappropriate under Sharia law. "You cannot have long-short hedge funds, because the idea of short selling, or selling something that you don’t own, runs contrary to the principles of Islamic finance," Fares Mourad, Head of Islamic finance at Swiss private bank Sarasin told Reuters. "I have not seen a credible structure that resolves this," Mourad said.

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Tags: bank sarasin, exponents, investment strategy, islamic finance, legal principles, private bank, reuters, sharia, short hedge

Reuters – Amiri Capital, the Islamic asset manager backed by investment firm Olivant, said on Monday it has teamed up with broker Newedge to launch the first Islamic fund of long/short hedge funds marketed in the Middle East.

The partnership with Newedge — itself a joint venture between Calyon and Societe Generale — allows Amiri to launch the fund, which was put on hold when original partner Lehman Brothers filed for bankruptcy protection in September.

Hedge funds are a relatively new concept in Islamic finance and a bone of contention, with some scholars rejecting them as speculative and others sanctioning them as a tool for diversification.

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Tags: amiri, asset-manager, bankruptcy protection, bone of contention, calyon, diversification, investment-firm, islamic finance, islamic fund, joint-venture, lehman brothers, middle-east, newedge, olivant, partnership, reuters, short hedge, societe generale