Bahrain’s Al Salam Bank has launched a sharia-compliant fund that will invest in listed Asian real estate investment trusts (REITs), the lender said on Tuesday.
The fund will invest in between 15 and 35 positions and be managed by Swiss-based B&I Capital AG, with Al Salam providing seed capital for the fund. The Islamic lender did not reveal the expected size of the fund.
Al Salam said the fund would offer a more liquid tool to invest in real estate, an asset class favoured in Islamic finance, which follows religious guidelines such as bans on tobacco, alcohol and gambling.
“The fund aims to deliver benefits of diversified real estate ownership in Asia while avoiding many of the pitfalls of holding physical property and real estate developer equities,” said deputy chief executive Anwar Khalifa Al Sada.
Al Salam was an anchor investor in the Sabana Industrial REIT, which was listed on the Singapore exchange in 2010 and was one of the world’s first REITs to adopt Islamic principles.
REITs are relatively scarce in Islamic finance, although conventional ones are well-established in mature markets such as Singapore and Australia.
A handful of Islamic REITs have been launched, including Dubai Islamic Bank’s Emirates REIT in 2010. Malaysia now has three listed Islamic REITs: Axis Real Estate Investment Trust , Al-Aqar Healthcare REIT and KLCC Real Estate Investment Trust.