'Now is a great opportunity to buy sukuk at cheap prices. We believe much of last year's panic-selling in this market was unjustified, but it means these fundamentally strong assets are available at extremely attractive valuations.'
said Mr. Jamal Bin Ghalaita, General Manager of Consumer Banking and Wealth Management at Emirates NBD.
He added: 'Many regional sukuk are issued by governments or quasi-government companies. The bonds often carry investment grades from international ratings agencies, yet they're pricing in a high risk of default. We believe the risk of default by government-backed issuers is extremely small, allowing us to target equity-type returns with the security of a fixed income product.'
Emirates Sukuk Fund No 1 will invest in a basket of issues in order to diversify risk. Companies in the Middle East and North Africa that have outstanding sukuk include well-known names such as Aldar Properties, a publicly-traded property developer that is part-owned by the Abu Dhabi Government, and JAFZA, a UAE based developer and operator of economic zones, part of Dubai World.
The Fund opens the Islamic bond asset class to a wide range of investors, with a minimum investment of $25,000 for individual investors and $1,000,000 for institutional investors. The secondary sukuk market is difficult to access but, by investing through the Fund, investors benefit from scale, diversification, and the skills of expert fund managers. Should the Fund meet certain return targets, the Fund will be called and gains will be locked in for investors.
Deon Vernooy, Senior Executive Officer of EIS, a company licensed and regulated by the Dubai Financial Services Authority, said: 'Investors in the Fund can participate in the sukuk market at much lower minimums than those required from investors making direct purchases. The Fund will be managed by the experienced and successful team at EIS, which benefits from being part of Emirates NBD group, the largest bank by assets in the region. Additionally, we will seek to return capital to investors as soon as possible through distributing income, realised maturities, issues sold which are not sought to be reinvested plus a call feature if the total portfolio value rises above certain levels.'
