Hedge funds seen unsuitable for Islamic finance

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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