HSBC Saudi Arabia has launched its first sukuk fund, a Shariah-compliant fixed-income product, for the country’s retail market.
Described as having a “medium to high” risk profile, the HSBC Amanah Sukuk Fund, which launched last month, is the first open-ended sukuk fund to be offered by HSBC Group.
Managed by the asset management division of HSBC Saudi Arabia, the fund will invest in a concentrated portfolio of between 15 to 20 sukuks primarily issued from within Gulf Cooperation Council countries, although there are no geographical constraints.
HSBC said the fund would aim to have an average duration of five years or less, with an average risk rating of A-.
The portfolio will be drawn from an investment universe of sukuks approved by the Shariah Supervisory Committee of HSBC Saudi Arabia, money market funds approved by Saudi Arabia’s Capital Markets Authority and Islamic Certificates approved by the Shariah Supervisory Committee.
HSBC said a sukuk “can be classified as the Shariah-compliant equivalent of bonds” and “represent the credit obligation of the underlying issuer”.
The Shariah nature of the product places certain limitations on the fund manager. These restrictions include bans on “conventional” leveraging or hedging, short-selling, securities lending and the use of investment derivatives such as CDS.
The fund has a minimum initial investment of $25,000 (£15,000, aed92,000) and charges an annual management fee of 0.75%, which is reinvested into the fund.