CASE STUDY
Shariah-compliant Private Equity Secondaries
Middle Eastern Wealth Manager | Q3 2021
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Shariah-compliant Private Equity Secondaries
Engagement at a glance
Client Country/Type: | Middle Eastern Wealth Manager |
Year: | Q3 2021 |
Asset Classes, Geography: | Shariah-compliant Private Equity Secondaries, Global |
Portfolio Size: | USD 50 million |
Structure: | Pooled fund or separately managed account (subject to Shariah compliance) | Service Provided: | Manager selection | Investment Objectives: | Portfolio diversification and enhanced returns (minimum net IRR of >10%) |
Client-specific concerns
This Middle Eastern wealth manager sought bfinance’s assistance in building a portfolio of Shariah-compliant private equity secondaries. Although the client was intent on accessing globally focused managers with a tilt towards buyouts, it was also willing to include growth and venture capital investments as smaller allocations. Participating managers were required to provide solutions to address Shariah-derived prohibitions on allocating to specific industry sectors—such as investments associated with conventional finance, alcohol, gambling, adult entertainment, tobacco and the production of weaponry/armaments—while still proving themselves capable of delivering market returns across a well-diversified portfolio.
Outcome
- Laying the search groundwork: since the client was a first-time investor into private equity, the bfinance team worked closely with its internal management team to provide in-depth education about identifying appropriate options in line with its investment parameters and risk appetite.
- Expanding the manager universe: bfinance worked closely with firms that wanted to participate in the request for proposals but had no direct experience of working with Shariah-compliant investors.
- Bringing transparency to potential costs: the growing complexity and lack of transparency surrounding fees and incentives in secondary structures can make it challenging for investors to compare the costs of different offerings; with this in mind, bfinance provided in-depth analysis to support the scoring of different fund offerings.
- Delivering meaningful quantitative analysis: using its proprietary quantitative methodology, bfinance provided a detailed comparative overview of managers’ track records in what is undeniably a newer part of the private equity market, where benchmarking is limited in depth and composition.
Our specialist says
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With the client’s encouragement, we reached out to talented managers that were investing in assets that appeared readily applicable to Shariah investment parameters—irrespective of whether they had a pre-existing Shariah product or strategy—and invited them to consider submitting proposals. Perhaps unsurprisingly, we received considerable interest from the general partner universe, but very few firms could readily support a Shariah-compliant mandate as part of a comingled fund solution and still provide a high-quality investment proposition. That said, however, the ultimate allocations went to one firm with Shariah experience and one without, so we considered our approach to be a success. Looking ahead, we feel that private equity firms have a major opportunity to develop—and deliver—Shariah-compliant products alongside their standard pooled fund solutions for this community of LPs.
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CANADA
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États-Unis, Chicago
220 North Green Street
Chicago
IL 60607
Téléphone: (312) 829-4353
Email: info@bfinance.com
-
CANADA
1250 Boulevard René-Lévesque O.
Suite 2200, Montreal
Québec H3B 4W8
Téléphone: +1 450 902-4965
Fax: +1 514 393 9069
Email: info@bfinance.com
-
CANADA
88 Queens Quay West
Suite 2500, Toronto
Ontario M5J 0B8
Téléphone: +1 (416) 560-7275
Email: info@bfinance.com
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Téléphone: +31(0)20 794 61 00
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Royaume-Uni
36 Queen Street, London
EC4R 1BN
Téléphone: +44 20 7747 8600
Fax: +44 20 7747 8600
Email: info@bfinance.com
-
Allemagne
Theresienstraße 1
80333 Munich
Téléphone: +49 89 55 29 59 00
Fax: +49 89 55 29 59 00
Email: info@bfinance.com
-
France
49, Avenue d'Iéna
75016 Paris
Téléphone: +33 1 45 02 64 00
Fax: +33 1 45 02 64 01
Email: info@bfinance.com
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Pays-Bas
Symphony building
Gustav Mahlerplein 3-115, 26th Fl
1082 MS Amsterdam
Téléphone: +31(0)20 794 61 00
Email: info@bfinance.com
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Australie
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NSW 2000
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Chine
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199 Des Voeux Road Central, Sheung Wan
Téléphone: +852 3953 7874
Email: info@bfinance.com
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Australie
Level 8, 99 Elizabeth Street, Sydney
NSW 2000
Téléphone: +61 (0)2 8052 3930
Email: info@bfinance.com
-
Chine
Level 20, Infinitus Plaza,
199 Des Voeux Road Central, Sheung Wan
Téléphone: +852 3953 7874
Email: info@bfinance.com