London is on the right track to becoming a key Islamic finance hub, alongside Dubai and Kuala Lumpur, as the government backs another Sharia-compliant product.
London Central Portfolio (LCP), a property asset management firm, has launched its second Sharia residential fund, London Central Apartments II (LCA II), further opening up the country’s real estate investment opportunities for the Muslim community.
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Following the take up of its first Islamic fund, LCA II, the fourth of LCP’s closed-end funds, is a five to seven years fund, projecting an internal rate return of 12% p.a., with shares to be quoted on the Channel Islands Securities Exchange Authority.
LCA II aims at creating a high performing residential portfolio, and is open to both the institutional sector and individuals.
Investors can subscribe directly for £85,000 or through SIPPs and SSASs with no minimum restrictions, LCA said. Mayfair brokers Killik & Co. LLP accept LCA II investments within their ISA and NISA wrappers. Furthermore, a trustee consolidation scheme, run by Kleinwort Benson Channel Islands Corporate Services Limited, will accept investments from £25,000.
In a recent HM Treasury’s private seminar held to commemorate the first anniversary of the government’s £200m sovereign Sukuk’s announcement, Naomi Heaton, CEO of LCP, said:
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By GlobalData"The sovereign Sukuk invests in commercial property and we are delighted the government is so solidly behind us in opening up the real estate sector to Muslim investors through our new Sharia residential funds.
"Muslims make up 25% of the world population and with 3.3 million British Muslims alone, corporates should definitely be looking at Islamic investment solutions. This is particularly true in the real estate sector, which is popular amongst Muslims who look for investments that are asset-backed or asset-based."
LCP is the only company to offer Sharia-compliant residential funds in the UK.
LCP’s first Sharia-compliant fund, London Central Apartments, investing in central London’s private rented sector, attracted 25% Muslim subscriptions, split 50/50 between individuals from the Middle East and Britain, the firm said. Closed in May 2013, the portfolio had increased by 27.8% at its first annual valuation in March 2014.
"Bricks and mortar, and particularly residential property, fits well within Islamic investment principles because it is asset-backed and tangible. These are two of the main requirements for a fund to be Sharia-compliant," Lauren Awcock, communications and investment manager, LCP told PBI.
She added: "Commercial property can be more difficult as it limits the tenant pool to certain companies and, for example, the asset cannot be leased to institutions selling alcohol or providing gambling."
After gathering finances for the £100m fund, LCA II fund is currently calling for final subscriptions by 30 November, the firm said.
The UK became the first country outside the Islamic world to issue a government backed Islamic investment vehicle. It was oversubscribed, attracting £2.3bn worth of investments. With their Sukuk, the government witnessed one third of subscriptions coming from UK-based Islamic banks, 37% from the Middle East and 24% to Asia .
Currently, the UK has six Sharia-compliant financial institutions, with total assets of $19bn. According to reports, $38bn of outstanding Sukuk was raised through 53 issues on the London Stock Exchange since 2009. It has also announced a new Islamic index on the London Stock Exchange (LSE) and this year in June, it launched a £200 million Sukuk.
The LSE also has a mounting presence in Sharia-compliant Exchange Traded Funds (ETFs) with seven available based on Islamic indices. In addition, Takaful, a type of Islamic insurance, has reached a new high in the UK with premiums estimated to have reached $30bn in 2012.
Islamic Bank of Britain has this year launched the first Sharia-compliant cash ISA. Back in 2012 also began offering Muslim workers a Sharia-compliant pension fund in the public sector.
Globally, the Islamic Finance industry has grown 150% to £1.3 trillion since 2006.
