Kauthar Commodity Funds record leading growth in 2009

Hedge funds are thought to be risky and in a weak economic environment, these funds are usually ignored by most investors.

However, the Dubai Multi Commodities Centre Authority’s (DMCCA)Shariah-compliant fund known as - Kauthar Commodity Funds - recorded considerable gains in the last 12 months ending December 31, 2009.

While announcing the results, Ahmed Bin Sulayem, Executive Chairman of DMCCA revealed that the good results of Dubai Shariah Asset Management (DSAM) Kauthar Commodity Funds are a testimony to the stability of Islamic financial sector.

“At DMCCA, we are committed to supporting the expansion of the Islamic financial services industry, and our innovative DSAM Kauthar Funds represent the future for that high-growth sector,” said Bin Sulayem.

“Our net return on funds-of-funds for 2009 was 41 per cent,” he added.

The fund-of-funds total assets under management stood at $250.1 million (Dh918.64 million) as of December 31, 2009.

These relatively new products were launched during a global downturn. The DSAM Kauthar Commodity Fund (DKCF), is an equally-weighted fund-of-funds comprising of four single-strategy, commodity-focused funds that invest exclusively in Shariah-compliant long/short equity hedge funds on the Al Safi Trust platform.

Fund managers key to success

Any hedge funds success is in the hands of the fund manager and during the same period, DKCF managers returned roughly double the average return of their equity and commodity benchmarks, said Eric Meyer, Chairman and Chief Executive Officer, Shariah Capital.

“The strength of our fund managers, who were selected on the basis of their outstanding track record in commodities over the past two decades, is clearly second to none,” the executive added.

“Each of the partners involved in the development and marketing of these exceptional products is extremely proud of our success in 2009, and we look forward to sustaining our performance in the 12 months to come,” Meyer said.

Top performing commodity funds

In 2009, the DKCF was one of the top-performing commodity funds among fund-of-hedge funds globally, based on Bloomberg and Eurekahedge data. DKCF ranked in the 99th percentile of the Bloomberg Active Index for Islamic Funds as well as the 99th percentile of the Eurekahedge Fund of Funds Index.

Excluding funds with less than $100 million in assets, the DKCF is the top-performing commodity fund-of-funds and the leading Shariah-compliant fund-of-funds, according to hedgefund.net website.

In addition, DMCCA’s DSAM Kauthar Gold Fund, one of four funds distributed under the DSAM Kauthar label, has received the “Outstanding Performance & Innovation Award” from MENA Fund Manager, the region’s leading industry title.

The DSAM Kauthar Global Resources & Mining Fund, which recorded gains of more than 55 per cent in 2009, is ranked in the 99th percentile of the Reuters Lipper TASS Energy Index, putting it in the top 10 of 2,150 funds reporting to Lipper.

Meanwhile, the DSAM Kauthar Energy Fund was up 41 per cent as of December 31, 2009, while the DSAM Kauthar Natural Resources Fund was up slightly more than three per cent at the end of the same period.

“The award-winning performance of the DSAM Kauthar Gold Fund as well as the exceptional gains recorded by the DSAM Kauthar Global Resources & Mining Fund and Energy Fund place them at the top of worldwide indices,” said Malcolm Wall Morris, Chief Executive Officer, DMCCA.

“These cutting-edge, Shariah-complaint alternative investment products have been specifically developed to meet the needs of regional investors, while also appealing to conventional institutional investors. Based on past performance, we are confident that we will continue to expand and diversify our client base in 2010,” he added.

Investor-interest in commodity funds

Islamic finance products like these abide by the discipline of Shariah to avoid debt and overcome short sales solution. The funds have proved to be successful as more investors are shying away from other investments and concentrating on commodity stocks.

“Any investor is looking at diversified investments and new products which produce world class results. Our funds don’t invest in over leveraged companies thereby limiting our risk of failure,” says Meyer.

“Investors are now understandably conservative in their approach. Therefore, we will continue to focus on educating the market, highlighting to investors the sterling performance of the funds and underscoring their long-term appeal,” he added.

The fund will be open in February 2010 and depositors need a minimum of $5 million to invest in this fund.