Qatar is set to become a "key international distribution hub" for Shariah-compliant products as the Islamic finance market continues to emerge, a new report has shown.
While infrastructure projects will feed new alternative fund structures and boost public-private partnerships, Qatar also has a long-term interest in developing as a center for Islamic finance, said Qatar Financial Centre Authority in its first 'Mena Asset Management Barometer'.
Currently, almost 50% of the funds located in the country are Shariah-compliant vehicles, marking it out — along with Saudi Arabia — as one of the region's most important fund centers for Islamic finance.
Chief among the country's Islamic product is Global Investment House's Al-Beit Al-Mali Shariah compliant fund. With $17.1mn in assets under management (AuM), the fund's assets are invested in Shariah-compliant Qatari equities — it will also invest in unlisted equities.
According to the report, the vehicle has had "stellar" — 42.3% returns over three years and was up 3.9% year-to-date, as of January 30.
The position of Islamic finance in Qatar, according to barometer respondents, bodes well for the future, as demand for Shariah-compliant products grows, particularly from Mena's internal markets and new centers of demand in Southeast Asia, Australia and among a tranche of UK and European pension funds.
The alternative asset management sector in Qatar, like the rest of the country's fund management universe remains at a relatively early stage of development, the report shows.
However, according to barometer respondents it stands to benefit from three distinct conditions over the course of 2013 — increased infrastructure spending, financial support of government agencies and financial regulation that is working to encourage strategy diversity among the country's pool of asset management firms.
"These conditions are serving to drive strategy innovation and manager diversity," the report said.
Managers who responded to the barometer said Qatar was the most likely Mena jurisdiction to introduce meaningful short-selling regulation, capable of aiding the creation of a domestic hedge fund sector.
Although there was some confusion about how advanced and concrete these plans were, hedge fund management firms that responded to the barometer all picked Qatar as their favoured location to establish a presence in the GCC.
Private equity players are particularly drawn to the Qatar Financial Centre (QFC). Last year, Qatar signed a deal to co-invest $250mn with Barclays' natural resources private equity investment unit (BNRI).
The investments in BNRI portfolio companies will be done through the Qatar Asset Management Company, a joint venture between the Qatar Investment Authority (QIA) and the Qatar Financial Centre Authority (QFCA).
BNRI will open a regional headquarters in the QFC and will relocate key investment professionals to Doha to manage BNRI's global portfolio.
Qatar Holding, a part of QIA, has formed emerging markets' manager– Aventicum Capital Management with Credit Suisse in November 2012.
The firm's investment professionals and portfolio managers will relocate to Doha to manage investments.
A number of private equity and infrastructure funds are keen to engage with the country's infrastructure boom via direct investment or by taking stakes in companies associated with the projects' supply chains.
The evidence for this interest is palpable, the report said. Qatar is ranked first in Mena and the second globally in terms of opportunities for infrastructure investments, according to global built asset consultancy, EC Harris.
The country has outlined public investment plans worth $95bn over five years to 2016, as it prepares to host the 2022 World Cup.