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Al Rajhi Capital Launches New Capital Protected Funds

Al Rajhi Capital, the investment banking subsidiary of Saudi Arabia's Al Rajhi Bank, has launched Capital Protected Funds. As the latest addition to Al Rajhi Capital's diversified product offering, the Capital Protected Funds are a Shariah-compliant suite of three-year closed-end mutual funds offering quarterly redemption.

Capital Protected Funds are open to individuals, corporates and institutions, both local and foreign. They have a minimum subscription of SR10,000 and are open for investment commencing April 17, 2010 for a period of 44 days ending May 30, 2010.

Al Rajhi Capital claimed that there are three Funds in the Capital Protected Funds family providing varying levels of capital protection from 90 to 95% and exposure to local, regional and international markets so as to offer investors greater choice in their overall asset allocation.

The funds include: Al Rajhi Local Shares Capital Protected Fund, offering 90% capital protection, Al Rajhi GCC Shares Capital Protected Fund, offering 90% capital protection, Al Rajhi international shares capital protected fund, offering 95% capital protection.

The objective of the Capital Protected Funds is to present investors with dual benefits. The funds will provide capital protection whilst seeking returns from capital growth through investments in Shariah-compliant equities invested in the Saudi, GCC or international markets.

To achieve the aim, the funds’ strategy will be to invest a significant portion of assets through deferred sales of commodities thus ensuring capital is protected. At the same time, to generate capital gains, the remaining assets are invested, through an Arbun mechanism, in a ‘Dynamic Portfolio’ which is actively managed so as to effectively control the volatility within a given limit while capturing profits from positive trends. Investments in the ‘Dynamic Portfolio’ will be comprised of both equity instruments and lower risk solutions offered by Al Rajhi Capital such as its commodities fund.

Marcus Andrade, CEO of Al Rajhi Capital, said: “Today more than ever, security is top of mind for investors and we are delighted to introduce a product that considerably eliminates the risk of capital loss. Our capital protected funds are ideal for more cautious investors,allowing them to benefit from the potential upside of more risky asset classes such as equities whilst knowing their capital will be protected all the same.”

Gaurav Shah, head of asset management at Al Rajhi Capital, said: “Investors seeking security and with a time horizon of three years are our target audience. There is considerable institutional and retail client demand for solutions that gravitate towards capital protection. Hence, it is timely for Al Rajhi Capital to launch these products now to respond to market needs, as well as to provide more choice to investors.

“These funds are unique in that they offer investors access to a proven equity investment franchise along with reduced risk of capital loss.””We expect strong investor demand and are confident that the capital protected funds are the right product for many of our clients and investors who are today looking for the optimal risk and reward proposition, which this suite of funds offers.”