Launch Partners

Launch Partners

BlueBox upbeat on Shariah fund prospects

BlueBox Asset Management is upbeat on the prospects of its first Shariah compliant fund, as fortunes seem to have turned around for this Cayman Islands-domiciled offering launched in July 2022, IFN Investor has learned.

Co-founder and Lead Portfolio Manager William de Gale told IFN Investor that entering the Shariah space with BlueBox Islamic Global Technology Fund has been an uphill journey to win the confidence of investors with this new brand.

This arduous journey began with the conventional BlueBox Global Technology Fund launched in 2018. Run in partnership with BlueBox Wealth Management, this fund’s assets under management (AuM) had grown to be more than US$1.5 billion at that time.

Following the conventional fund’s success, BlueBox Asset Management went on to create an Islamic version in partnership with seed investors, ProAltus.

William explained BlueBox decided to enter Shariah investment space because it was then felt the Shariah compliant equity market was poorly served.

“Large and successful investment firms did not see the need to create Islamic products, as the size of the market was small. This was exacerbated by the perceived administrative burden of maintaining Shariah compliance. The Shariah market was therefore left to second-tier firms and under-performing fund managers, who saw the Islamic market as less competitive.”

Applying a Shariah screen to its well-run conventional equity portfolio, the firm excluded non-compliant stocks and proceeded to scale up the remaining portfolio valuation back to 100% to produces the new Islamic fund.

William said the firm found this resulted in a portfolio with the tendency to outperform the conventional fund upon which it is based. “When we back-tested, by applying our Shariah screen retrospectively to the first four years’ track record of our conventional fund, it added roughly 1% a year to performance.”

Getting the Shariah fund to market faced several regulatory hurdles and when it finally launched, the initial subscription draw was very small – reaching US$3 million for its first year.

“The fund’s costs, largely fixed, were high relative to the AuM, creating a huge performance drag until we started to see inflows from July 2023.” William said interest picked up after the firm signed a distribution agreement with KFH Bahrain in August 2023.

Following rapid growth in Bahrain-fed subscriptions over the past nine months, BlueBox Islamic Global Technology Fund has charted 48.4% return as at the 31st May 2024 or 23.6% annualized return. The fund’s AuM stood at US$13 million as at the 30th June 2024.

William is upbeat on this Shariah compliant fund’s prospects with another distribution deal in the works for UAE.

Looking forward, William said the conventional BlueBox Global Technology Fund is closing in US$2 billion AuM and the firm anticipates the Islamic version has the potential to match this performance.

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