Islamic finance awards: Best fund manager

Best fund manager Wafra Investment Advisory

Fund management is fast becoming one of the most competitive segments in Islamic finance. HSBC Amanah and CIMB Islamic have launched groundbreaking China- and infrastructure-related funds over the past year but the award goes to Wafra for its Kuwaiti dinar ijarah fund.

So far Wafra has launched three such funds, whose fixed yields are denominated in dinars while the underlying leases are in dollar-denominated assets. The funds make investments in dollars but distributions are denominated in dinars. The funds use an Islamic swap structure comprising independent purchase and sale legs of commodities at different pre-agreed murabaha rates. The funds make monthly distributions and the capital is repaid to investors at the maturity of the funds (end of month 60) or as extended by Wafra.

The funds typically authorize special purpose vehicles, which are subsidiaries of the lease originator, to purchase a variety of different types of equipment. A fund would then immediately lease the equipment back to the relevant SPV. The underlying leases are expected to provide monthly rents adequate to make the monthly distribution payments to investors in addition to the fees and other expenses incurred. The SPV then subleases the equipment to lessees pursuant to the terms of the subleases identified when a fund acquires the equipment. Wafra monitors the servicing of these subleases and the releasing of the equipment, which is usually conducted by lease originators. The majority of the income is derived from the subleases.