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Taking ownership.

Summary: This issue Islamic Business & Finance focuses on Islamic commodity funds

The Islamic funds industry made my job pretty easy this issue - there actually isn't a lot of data on Islamic commodity funds to analyse. As evidenced by Dubai Multi Commodities Centre's recent enthusiasm - in March they launched an Islamic commodity trade platform and an Islamic commodity fund, Gold T F, to invest in gold - commodity funds are pretty useful tools for Islamic investors, with no shortage of real assets and the added bonus of guaranteed demand: everyone needs to eat.

Upon launching the CIMB Islamic Global Commodities Equity Fund, Datuk Noripah Kamso, then Chief Executive of CIMB-Principal Asset Management, pointed out, "Commodities are lowly correlated to traditional asset classes such as equities and bonds, thus providing a useful diversification tool in a global investment portfolio. We believe the funds are attractive for investors concerned with rising prices of goods as commodities provide an effective hedge against inflation."

And yet the Islamic funds industry continues its reliance on equities, with few Islamic funds trading under the commodity label. Islamic commodity funds work by purchasing a commodity which is resold with the profits distributed among shareholders. Stipulations on an Islamic commodity fund include concrete proof of ownership from the seller; and forward sales are generally frowned upon, although there are two types of contract, Istisna'a and Salam, which allow a variation of it.

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Publication:Islamic Business & Finance
Date:Sep 12, 2013
Previous Article:East and West, Shari'ah- compliant best?
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