Reuters- Demand for hedge funds and for Islamic finance is booming, which makes a hedge fund that complies with Islamic law the holy grail for fund managers who want to tap huge liquidity in the Gulf.<\/p>\n
But most Islamic finance industry players say the two sides are incompatible and that common hedge fund strategies break Islamic law.<\/p>\n
Others say that Islamic finance, in order to prosper, needs to develop tools to enable investors to hedge against risk, but that does not necessarily mean hedge funds.<\/p>\n
“It’s absolutely imperative that the Islamic finance industry has hedging tools,” said Afaq Khan, head of Islamic banking at Standard Chartered.<\/p>\n
“You have to segregate the two. Hedge funds are work in progress. Islamic derivatives for hedging purposes are absolutely allowed as a risk management tool,” he added.<\/p>\n