Jersey Approves First Islamic Hedge Fund

by Amanda Banks, Tax-News.com, London

08 March 2006

While a top Jersey team tours Bahrain, Qatar and the UAE, the island's Financial Services Commission has approved the jurisdiction's first Shari’a-Compliant Hedge Fund.

The Algo Al-Qayyim Fund Limited, which was approved by the Jersey Financial Services Commission at the end of February 2006, breaks new ground in Jersey’s expanding hedge fund sector. The Fund will be administered in Jersey by Volaw Trust & Corporate Services Limited, who spent two years working on the project. It required input from the Scholars provided by the Shari’a Supervisory Board of Yasaar Ltd., the skills of Algo Capital Management in devising appropriate screening techniques and the support of Citibank, acting as prime broker. The Fund was approved by the Commission as an Expert Fund in less than a week and will be launched shortly.

Trevor Norman, Director of Volaw Trust & Corporate Services, commented: “Even for a technically complex fund, the approval process was made easier because of Jersey’s Expert Fund regime where the emphasis is on investor protection and the quality of the service providers involved in the promotion and administration of the fund.”

In order to achieve its objectives of maximising income and price appreciation, and in order to allow the Fund to ‘short’ a stock in a Shari’a-compliant manner, the Algo Fund uses the ‘Urbun’ contract of Islamic law - a deferred sale with a down-payment where, should the buyer not complete the purchase, the down-payment becomes a forfeit. Whilst establishing this methodology is complex, putting it into practice is a challenge requiring a concerted co-ordinated effort from all the parties involved.

Pierre Horsfall CBE, Chairman of Jersey Finance, added: “Jersey not only has the fiscal, regulatory and legislative environment that will support global investment strategies for international investors and their advisers, it has also the range of banks, finance houses and law firms with specialist skills that can help create Shari’a-compliant fund and trust vehicles.”

The Government-led Gulf delegation will be emphasizing its specialist skills in developing Islamic financial instruments during the tour. Leading the delegation, the fourth to the region in as many years, is the Island’s Chief Minister, Senator Frank Walker. In addition, the delegation includes Senator Philip Ozouf, Minister for Economic Development; David Carse OBE, Director General of the Jersey Financial Services Commission; John Harris from the States of Jersey; and Pierre Horsfall CBE, Phil Austin and Beverley Le Cuirot from Jersey Finance, as well as senior Finance Industry practitioners.

Mr Horsfall, who will host the receptions alongside the Island’s Chief Minister, added: “The Middle East remains one of the most important regions in the world in which Jersey does business and the commercial links between the Island and the region are expanding at a significant rate. This is most evident in the financial services industry with an increasing number of Jersey firms establishing a presence in the Middle East and Middle Eastern businesses creating a platform in Jersey to boost their links with the Island.

“We are delighted to once again return to the region to highlight Jersey’s long standing track record in the Gulf and to meet colleagues and contacts old and new.”

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