Bahrain's GFH launches $100m GCC sukuk fund

Diversified fund includes a basket of fixed-income instruments from GCC countries

Bahrain-listed GFH Financial Group says it aims to generate returns to the sukuk fund holders through active asset allocation for an above average long-term investment return. Shutterstock

GFH Financial Group, an investment bank based in Bahrain, rolled out and seeded a $100 million diversified sukuk fund as it seeks to tap into the growing appetite for Islamic bond issuances in the region.

The fund will hold a portfolio of sovereign, quasi-sovereign and corporate sukuk and sukuk-related securities from various countries and issuers, primarily in the GCC, and will be managed in accordance with Sharia principles, GFH said on Sunday.

The move follows GFH's agreement with Credit Suisse to provide financing and fund administration services, the company said.

“Global borrowers issued more than $23 billion of Sharia-compliant debt in 2021 and global sukuk supply is expected to accelerate in 2022. The GFH sukuk fund aims to capitalise on post-pandemic economic growth and recovery,” said Salem Patel, head of asset management at GFH.

“The market is becoming more buoyant as economies in the GCC recover amid a revival of key sectors.”

Global sukuk issuances surged by 36.1 per cent in 2021 to $252.3bn and are expected to continue growing this year, according to a report from Fitch Ratings.

Robust Islamic investor appetite, a diversification in funding goals and Islamic-finance development agendas are expected to drive the growth of sukuk issuance in the region.

Central banks, governments and multilateral institutions dominated sukuk issuances last year. GCC countries, Malaysia, Indonesia, Turkey and Pakistan accounted for $230.2bn of total deals.

The UK, Maldives and Nigeria also issued Islamic bonds during the period to help meet their funding needs.

Listed on the Bahrain Bourse, Dubai Financial Market and Boursa Kuwait, GFH's investment portfolio spans the Middle East, the US, the UK and Asia in sectors including health care, education and logistics.

GFH aims to generate returns to the sukuk fund holders through active asset allocation, credit selection, optimal leverage and duration management to achieve an above average long-term investment return on a risk-adjusted basis, the company said.

In January, GFH formed a new subsidiary Infracorp to focus more on infrastructure and property assets. Infracorp will manage an asset portfolio worth about $3bn, which includes land in the Gulf, North Africa and South Asia.

GFH reported an 86.77 per cent surge in its 2021 profit as the company’s business units performed strongly despite coronavirus headwinds. Net profit attributable to the shareholders of the bank for the full year rose to $84.22m.

Total assets of the group grew 22.72 per cent to $8.08bn at the end of last year.

GFH also closed more than $1bn worth of new investments across the region in the international logistics, healthcare and education sectors in 2021, group chief executive Hisham Alrayes said.

These included investments in a FedEx logistics site in the US and a multi-speciality healthcare provider in the UAE. It also signed a partnership with Schroders Capital to co-invest in select private equity and venture capital deals in Europe and the Americas.

The company’s board recommended a total cash dividend of $60m, subject to regulatory approval.