Reuters- Demand for hedge funds and for Islamic finance is booming, which makes a hedge fund that complies with Islamic law the holy grail for fund managers who want to tap huge liquidity in the Gulf.
But most Islamic finance industry players say the two sides are incompatible and that common hedge fund strategies break Islamic law.
Others say that Islamic finance, in order to prosper, needs to develop tools to enable investors to hedge against risk, but that does not necessarily mean hedge funds.
“It’s absolutely imperative that the Islamic finance industry has hedging tools,” said Afaq Khan, head of Islamic banking at Standard Chartered.
“You have to segregate the two. Hedge funds are work in progress. Islamic derivatives for hedging purposes are absolutely allowed as a risk management tool,” he added.
