WestLB-Tricon Forfaiting Fund Ltd recently successfully launched its class C Shares for Islamic Trade & Commodity Finance. The fund believes this to be a first in the trade finance and Islamic investment markets as a whole.
With Tricon Trade Management Limited (Bermuda) as investment manager and WestLB AG (London) as investment advisor, the Bermuda-based institutional investment fund has been operating in the non-Islamic markets with its Class B Shares for almost three years with a consistently profitable track record.
The fund’s Islamic C Shares are the result of a partnering with iHilal Financial Services Ltd (Dubai) who provide vital consulting with regard to Islamic fund structure, co-ordinate all liaison with the shari”ah supervisors and are leading the placement campaign with Islamic institutions.
The shari”ah supervisors for the class C Shares are the Mohammed Elgari and Sheikh Nizam Yaqooby.
The new class C Shares offer a unique alternative investment opportunity in an international trade finance fund for Islamic investors to invest in back to back metals certificates, collateralised by shari”ah compliant forfaiting assets within a shari”ah compliant structure.
“Forfaiting”, say Fritz vom Scheidt and Jim Johnston at Tricon, “is a long-established banking practice of purchasing trade finance payment obligations falling due at a future date, usually evidenced by guaranteed drafts or notes, without recourse to the seller. The fact that this commercial activity originates from the shipment of goods makes it a natural activity upon which to base an Islamic investment structure.”
WestLB AG is one of the leading players in the global forfaiting markets. Piero Greco at WestLB AG’s London office states: “We consider the fund as a good vehicle to re-package trade-related assets in order to make them more easily accessible by a wider range of investors. The Islamic C Shares are a further step in that direction, to fill what appeared to be a gap in the Islamic investment world.”
“We were able to capitalise on a truly ground breaking opportunity with our shari”ah scholars to offer a product to Islamic investors which was in one hand able to give investors the liquidity required by them and on the other, a truly innovative and low risk Islamic investment with excellent returns and risk parameters,” adds Khuram Hussain, chief executive of iHalal.
The class C shares for Islamic Trade & Commodity Finance are un-rated and open-ended to maintain their ability to derive their investment benefits from all trade finance markets – especially the higher yielding emerging markets.
WestLB-Tricon Forfaiting Fund is based in Bermuda and registered with the Bermuda Monetary Authority as an institutional mutual fund. Its class C shares have been uniquely structured to bring all of the features and investment benefits of forfaiting to Islamic investors within a managed and diversified portfolio that is organised as a registered mutual fund and purchased by way of redeemable shares whose price is valued monthly. The C shares trade quarterly, with share redemption available at the end of each quarter upon 30 day’s notice.
The class C shares investment parameters call for its investment portfolio to take as deferred payment, at face value, for its sales of metals certificates, shari”ah compliant payment certificates issued by approved counterparties owning shari”ah compliant trade finance payment obligations. Such trade finance obligations, issued by banks, sovereigns, state-owned entities and senior tier multinationals are traditionally treated by their obligors as essential payment for essential goods.
Investment diversification is maintained with policies for spreading risk throughout a basket of maturities, countries and continents, with a maximum limit of 20% of the portfolio in any individual country.
The class C offering is for US$300mn in class C shares.
The fund is targeting its C shares to Islamic institutional money managers who will appreciate the fund’s blue-chip credentials:
Investment manager: Tricon Trade Management Limited, Bermuda
Investment advisor: WestLB AG, London
Islamic consultants: iHalal Financial Services Ltd.
Administrator and custodian: The Bank of Bermuda Limited, Bermuda
Documentation agent and sub-custodian: WestLB AG, London
Auditor: PricewaterhouseCoopers, Bermuda
Legal advisor to the fund: Cox Hallett Wilkinson, Bermuda
Legal advisor to WestLB: Norton Rose, London