Zawya | 25 October 2008
Food emerging as an alternate uncorrelated asset class
cru gearing up to offer Africa-focused agri-backed shariah fund in the UAE and region
United Kingdom, Dubai, October 25 2008: In the backdrop of the global financial contagion, cru Investment Management, the UK-based billion dollar investment company today said that asset-backed real Islamic investments offered a better option to investors to safeguard their investments than the conventional equity mode.
cru, which is targeting the UAE and the regional investors in the GCC to soon offer a shariah-compliant Fund focused on commercial agriculture in Africa, said that the financial turmoil and the resultant steep fall in the value of conventional market instruments will speed up the pace of the growing affinity towards Islamic finance and real assets globally.
Mr. Jon Maguire, Chairman, cru Investment Management, said: "Investors have been burned by public markets in recent times; they are now looking for an asset class uncorrelated with conventional capital markets. We believe that food is the new gold. It is emerging as a popular alternative asset class; especially in light of the global population estimates. Figures show that 80% of the world's population is set to urbanise by 2030 - if we don't grow food, who will feed these people?"
He said that cru has positioned itself as an entity with focus on social investments and is currently in advance stages of offering an alternative investment instrument combining its ethical and transformational investment focus with Islamic finance.
"I have brought on board an Islamic Finance specialist, Naveen Raza, to head up our Islamic offering. We will be promoting a new Islamic Africa Agriculture fund in the UAE, set for launch in March 2009."
Ms Raza, previously of HSBC Amanah, said, "I am delighted to be working on this new initiative. It is closer to the true ethos of Islamic finance than any other product on the market; combining excellent returns on capital with a focus on poverty alleviation and fairer distribution of wealth. This is the future of Islamic finance and should have been its focus right from the start."
The fund, which will invest in commercial agriculture in Sub-Saharan Africa, has dual-purpose - to ensure returns in the range of 15-20 per cent, while the investment helps to create jobs and give rural Africans the chance to help themselves out of poverty. Currently, cru has significant exposure to commercial agriculture in Malawi with over 2,500 hectares of land under its own control and another 4,000 hectares in outgrower schemes.
"Significantly, our fund comes at a time when current market conditions call for investment into real and tangible assets. One of the best places to put your money is into food production - prices are going up, population is increasing and mouths need to be fed. Africa is emerging as a destination of choice, especially for Middle East investors, as is agriculture. Investors are looking to diversify their portfolios by geography and asset type - Africa is the last frontier," Ms Raza said.
"In addition, investing in the fund will also support the various initiatives of the GCC governments to ensure food security at a time of inflation and shortages in the region," she added.
According to the company's estimates, the funds it raised through its existing Africa Invest Fund are financially engaging over 100,000 people in Malawi. It is also supporting 2,000 vulnerables through feeding programmes where orphans, widows, AIDs victims and the elderly receive a nutritious porridge for free every day.
The new open ended fund, set for launch early next year, has an ambitious target to raise over USD 13 billion over a number of years and have interests in many different sub-Saharan African countries.
"We have been marketing this Fund in Europe for the last few months and received a very positive reaction to it, especially from ethical investors. I am now excited to see the response from Islamic investors; particularly those that want to stay true to the spirit of Shariah-based investing," concluded Ms Raza.