Bahrain-based Ithmaar Bank has announced that the US$2bn Islamic private equity fund will be invested in infrastructure in the Middle East, North Africa and South Asia in projects worth over US$20bn.

Ithmaar will invest about US$750mn in at least three different projects in Bahrain in addition to four projects in China as well.

The fund, under formation and likely to be based in Bahrain, will be managed by Dubai-based Abraaj Capital and co-sponsored by Bahrain-based Ithmar Bank and Deutsche Bank.

The fund will target an internal rate of return of 15% per year and have a life of 10 years. It will be one of the largest ever raised in the region.

Ithmaar, who along with its partners had announced the shari’a-compliant alternative assets fund as part of its strategy to roll out products for the billions of dollars untapped investment opportunities across the region, would help to broaden the scope of investments in real estate and other sectors with promising return for the investors.

Earlier, the fund’s sponsors said they wanted to tap into burgeoning regional demand for private equity investments as well as the pool of funds in the Islamic finance industry, one of the world’s fastest growing niche financial markets.

The key targeted sectors for the fund will be oil and gas, petrochemicals, telecom, power, water, roads, healthcare and education. The investment opportunity in these sectors exceeds well over US$1tn.

The fund will invest in greenfield projects across the region, focusing on petrochemicals, power water, manufacturing and financial services. It will also provide capital to turn around underperforming companies and look to play a role in privatisations. The predominant focus of the fund will be to take majority/minority stakes in greenfield projects, participate in large-scale privatisations and invest in buyout and restructuring opportunities.