The Financial Times reports of growing demand for regional hedge funds in the Middle East and greater capabilities to mitigate risk of traditionally long-only investments in the region given the inability to short stocks. Ali al-Shihabi, chief executive of Rasmala Investments, says, “There is no such thing as a regional hedge fund – it is a marketing gimmick,” referring to the difficulties of shorting stocks, along with restrictions on leverage — both matters of which fall under specific limitations of Islamic Finance. Nevertheless, clients are demanding not only better access to regional investments, but also better risk management given inherent volatility of the developing capital markets, resulting in rapid booms and busts. In fact, FT says the Dubai International Financial Centre is responding to the louder calls for new regulations of the finance industry and plans to launch derivative products on some regional stocks in September. In the meantime, regional hedge funds are said to be increasingly utilizing synthetic OTC products (such as swaps) already heavily used by leading global investment banks, some of which are setting up shop in the region. Regional funds such as Ajeej Capital of Saudi Arabia and Evolvence Capital of Dubai are even finding the likes of Deutsche Bank, Merrill Lynch and Credit Suisse as trading counterparties, says FT.

Comments are closed.