Deutsche Bank Launches New Islamic Finance Products

by Carla Johnson, Investors Offshore.com

09 May 2005

Deutsche Bank and Abu Dhabi Commercial Bank (ADCB) on Friday announced the completion of the first ever Shariah compliant transaction for high net worth clients, linked to a basket of commodities.

The principal-protected transaction allows investors to benefit from the upside in prices of three key commodities: platinum, aluminium and crude oil. Exposure to a basket of commodities allows investors to diversify risk and decrease volatility when added to a portfolio of financial assets.

Previously, Islamic high net worth investors had no way to access the commodities market in a structured format, and were denied the opportunity to gain from the recent rallies in this asset class.

"This ground-breaking Islamic structure will allow high net worth investors to take exposure to this exciting asset class, to benefit from the diversification play in their portfolios in addition to taking advantage of the surging prices of commodities in response to strong demand pulls," explained Ahmed Barakat, Investment Services Product Manager at Abu Dhabi Commercial Bank.

"There is a growing appetite from Islamic investors for opportunities to invest in all asset classes. Deutsche Bank is at the cutting-edge when it comes to Islamic products and we plan to bring many more innovations to the market in the near future," noted Nizar Al-Shubaily, Global Head of Islamic Finance at Deutsche Bank.

Deutsche Bank is growing its suite of innovative, Shariah compliant asset and liability products for capital raising, hedging and yield enhancement purposes, as well as for retail and private banking uses.

"This represents ADCB's continuous move in introducing new innovative products to its distinguished clients," observed Ala'a Eraiqat, Head of Consumer Banking Group at ADCB.

Last month, Deutsche also launched what it described as the world's first Islamic foreign exchange hedge fund.

The Islamic FX Option, which is worth more than US$39.4m for the Bahrain-based Gulf Finance House, has been approved by Fareed Hadi, the secretary general and member of the GFH Sharia board and Mohammed Elgari, Deutsche Bank's Sharia adviser.

Effectively the option is based on a promissory currency sale undertaking that GFH has entered into with Deutsche Bank.

Under this arrangement, Deutsche Bank promises to buy the euro in the future at a predetermined price. The hedge funds' clients will benefit if the euro falls, but the option does not need to be exercised if the euro rises.

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