Dubai-based Abraaj Capital has announced that it will be forming one of the largest Shariah-compliant investment funds ever raised in the Middle East as part of a joint venture with Germany’s Deutsche Bank and Bahraini investment bank Ithmar Bank.
Shariah-compliant funds enable Muslim investors to abide by Islamic laws and practices as transactions are subject to similar religious rules that prohibit gambling, alcohol and pronography, for instance.
The so-called Infrastructure and Growth Capital Fund has a $2 billion target, and aims to achieve a 15 percent IRR per annum, according to an announcement from Abraaj.
Abraaj will act as the fund’s investment manager.
The fund will take majority or minority stakes in greenfield projects, participate in large-scale privatisations and buyout and restructuring opportunities, as well as provide mezzanine funding to companies in targeted sectors. Its preferred industry sectors span oil and gas, petrochemicals, telecom, power, water, roads, healthcare and education.
Arif Naqvi, CEO and executive vice-chairman of Abraaj, said in a statement: “Shari’a compliant finance is the fastest growing area of global financial industry and private equity, the fastest growing asset class in the Middle East. Bridging the two together creates an enormous opportunity for investors to participate in the regional success.”
With over $1 billion of assets under management, Abraaj closed last December its second buyout fund, ABOF II on $500 million. In March 2006, it formed a joint venture with Indian private equity firm Sabre Capital to raise a $250 million fund aimed at Indian investments.
Abraaj has had a close relationship with Deutsche Bank for some time. Deutsche owns part of Abraaj’s management company.