DIFC raises record $1.25 billion Islamic finance bond

DIFC, the Dubai government-backed investment group which is a big investor in private equity, has launched a record-sized Islamic finance bond, with the majority of its investors coming from outside the MENA region.

DIFC Investments, the investment arm of the Dubai International Finance Centre, has raised the largest ever $1.25 billion (€0.9 billion) straight sukuk, an Islamic finance bond.

A sukuk is a security that complies with Islamic law and its investment principles, which prohibit the charging or paying of interest.

The size of the fundraising illustrates the growing importance of Islamic finance as a method of investment. According to DIFC, 67 percent of the funds came from outside the region. 20 percent of the commitments were from Asia while 47 percent were from European investors. 

Bisher Barazi, managing director of DIFC Investments, said: “Our objective was to appeal to non-regional players keen to diversify their investments and we were overwhelmed by the attention. This reinforces the point that Islamic products are not only for Muslims and it appeals to investors that want access to the MENA region.”

Investors included banks, fund managers, central banks, and government agencies, as well as insurance and pension funds.

The sukuk, which will be used to invest in the MENA region and globally using Islamic finance methods, attracted an A1 rating from Moody’s and an A+ rating from Standard & Poor’s, reflecting the credit agencies’ recognition of the backing the fundraising received from the Dubai government. 

Private equity firms in the region have also attempted to tap in to the growing market for Islamic finance. Last month, Qatari private equity firm Corecap completed fundraising for its $150 million Shariah compliant fund. The fund is the first of its kind to provide companies with Shariah compliant funding through both equity participation and a mezzanine structure.

The raising of the record bond comes two weeks before the Islamic Alternative Assets Investment Forum on 25-26th June, which is being hosted by Private Equity International and Private Equity Real Estate at the Jumeirah Carlton hotel in London.