Shariah Capital, Inc. is a multi-dimensional company that creates Shariah-compliant financial products and provides Shariah compliant consulting and related services. It delivers these products and services under its own brand name, under co-branding arrangements with joint venture partners or on a private label basis. Its targeted clients are financial institutions and investment management firms that are building product platforms primarily directed to the Middle East, Asia and the Far East and, specifically, to Islamic institutional and high net worth investors.
Shariah Capital is committed to becoming a leader in modern Islamic finance by developing the solutions behind competitive Shariah compliant alternatives to conventional Western financial instruments and investment products.
In collaboration with prominent Shariah scholars and Western financial and legal experts, Shariah Capital has developed risk management tools that replicate the economics of conventional short sales, options trading and leverage with Shariah compliant equivalents. It has refined the screening criteria for equities and built a software engine that streamlines the process for determining Shariah compliance for publicly-listed companies.
Based upon this experience, Shariah Capital has advanced its skill sets to build similar Shariah compliant equivalents for conventional bonds (known as “Sukuk”), other derivative instruments, private equity strategies, liquidity management instruments, principal protection vehicles, exchange traded funds (ETFs), futures contracts, real estate investment trusts (REITs), home mortgages and global real estate.
Structuring a Shariah Overlay
Shariah Capital looks for opportunities, usually with joint venture partners, to establish new companies or to restructure existing companies or investment partnerships to comply with Shariah, particularly in industries whose underlying businesses, by definition, largely are Shariah compliant: healthcare, technology, energy, telecommunications, consumer and basic industries (construction, manufacturing, mining, etc.).
Shariah Capital selectively undertakes Shariah consulting mandates that can lead to more extensive, longer-term product development relationships. Our efforts include assembling teams of knowledgeable and experienced Islamic jurists to coordinate research followed by product certification and ongoing Shariah supervision. We also typically work with institutional clients and their legal counsel to explain the Shariah process and to facilitate compliance-related issues, including management of Shariah compliance risk and the challenges to specific product solutions.
Developing Shariah compliant investment products requires two critical elements that distinguish it from the development of conventional investment products. The first is time and intellectual capacity with prominent Shariah scholars, especially those trained or educated in Finance or Economics or who are familiar with capital markets and, in particular, U.S. 1934 Securities Act and 1940 Investment Company Act requirements.
The second is Western business, financial and investment managers who equally are conversant with 1934 and 1940 Act legislation, understand a product’s methodology and can work with Shariah scholars with a goal to formulate new products that accommodate both frameworks. Shariah Capital management has learned that Shariah scholars, working together with Western legal and finance professionals, should be involved early in the development process of a Shariah compliant product—both for their guidance as Islamic jurists as well as for their commitment to serious scholarship. Their leadership in defining pivotal issues and helping to devise practical solutions is invaluable to moving a product or investment project forward. Successfully sourcing and coordinating both sides within new Shariah compliant products is Shariah Capital’s competitive edge.
Access to Shariah Scholars
With the dramatic rise in demand for Shariah compliant products, internationally-recognized Shariah scholars, similarly, are in high demand.
Shariah Capital has always enjoyed close working relationships with some of the most reputable scholars in Islamic finance, the result of Eric Meyer’s early and full-time commitment since 2000 to learn directly from, and to work individually and collectively with, prominent Shariah scholars.
To address the problems caused by scholar shortages, Shariah Capital consolidated and enhanced its capacity with Shariah scholars in October, 2006 by hiring Shaykh Yusuf Talal DeLorenzo of Washington, D.C. as its full-time Chief Shariah Officer and a member of its Board of Directors. In this role, Shaykh Yusuf draws upon his relationships with Shariah scholars around the world to assemble committed critical thinkers best suited for Shariah Capital’s advisory mandates. He has formulated a process for identifying and commissioning Shariah scholars to projects best suited to their particular capabilities.
This access to, and process with, Shariah scholars gives Shariah Capital an advantage over competing firms: Shariah Capital now can offer clients and partners a senior Shariah scholar, permanently on staff. It enables the firm to commit to reliable product timelines and workflows.
Access to Deal Flow
Shariah Capital’s reputation in Islamic finance and its extensive contacts on Wall Street and in Washington, D.C. have led to numerous relationships – both where the firm acts as Shariah advisor and transactions where Shariah Capital creates and contributes a Shariah compliant solution. Shariah Capital’s value added – a Shariah compliant component imbedded within a transaction or an investment vehicle – is intended to make an investment (or project or company) acceptable to a wider audience that includes Islamic investors and thereby enhance its marketability.
Moreover, Shariah Capital and its executives have wide exposure to and experience with 1934 Securities Act and 1940 Investment Company Act regulations. Rewriting prime broker documents to accommodate its solutions for Shariah compliant hedge funds demanded that Shariah Capital senior management learn the intricacies of U.S. securities’ law. That expertise today enables Shariah Capital to distinguish between those Western products and instruments that potentially can be restructured to comply with Shariah (e.g., distressed debt) and those that are more challenging (such as convertible arbitrage hedge funds).
Shariah Capital is unlike any other firm in the Islamic finance industry with its combined in-house proficiency of Shariah scholarship and U.S. securities expertise and its direct mutual fund, venture capital and hedge fund management and marketing experience
Access to Clients
Through contacts developed by Shariah Capital senior management over nearly 25 years in the region, Shariah Capital has direct access to Middle Eastern institutional and high net worth investors. Regular travel to the Gulf, along with regular speaking engagements at conferences in the Middle East, gives the firm’s management direct client contact with traditional commercial banks, Islamic banks, investment management firms and local government investment authorities. On a first-name basis with CEO’s, institutional board members and other key decision-makers, Shariah Capital’s senior management have first-hand information about (1) institutional and high net worth investors, (2), their product interests, and (3) the factors – local and international – that impact their investment decisions. This access to investors and the ability to interpret their demand for Shariah compliant products often dictates the direction of the firm’s product expansion and determines the dimensions of Shariah Capital’s longer-term business lines.
Managing the Shariah Process
Acknowledging that Shariah expertise is fundamental to all Shariah-compliant solutions, and recognizing the need to manage the Shariah compliance process, Shariah Capital has enlisted Shaykh Yusuf Talal DeLorenzo as its Chief Shariah Officer to manage its Shariah process, from development to certification and, finally, to ongoing supervision. This position of Chief Shariah Officer is believed to be unique to Shariah Capital. It is designed to maximize Shariah resources at a time when Shariah scholars increasingly find themselves constrained by multiple obligations.
With his experience, scholarship and industry profile, Shaykh Yusuf plays a key role in ensuring the Shariah compliance of all of Shariah Capital’s assignments, as well as in assessing the feasibility of proposals and assisting in project development and execution. Working with management, Shaykh Yusuf coordinates wide-ranging groups of Shariah specialists to work with business and legal teams through the various phases of projects selected by Shariah Capital.