Prestige Funds’ Islamic vehicle seeded by Middle East LP

Prestige Funds’ sharia-compliant project financing vehicle has received a seed investment from an unnamed Middle Eastern investor.

The British fund manager launched the vehicle in 2021 in response to feedback from Middle Eastern LPs that a sharia-compliant vehicle would make it easier for them to work with the firm.

Premium Alziraea will pursue the same project finance strategy as the pre-existing open-ended Prime Alternative Finance vehicle, which seeks out government-backed on-farm bioenergy projects, which use farm and food waste to produce renewable biogas energy.

The vehicle will invest across a broad portfolio of projects and small businesses with a focus on UK agricultural, horticultural and rural small businesses that have historically operated with lower defaults than other sectors, the firm said.

Prestige added that the fund has been “designed to meet the requirements of allocators seeking sharia investments with impact characteristics.”

The firm said: “The Fund will be investing across a broad portfolio of projects and small businesses with a focus on UK agricultural, horticultural and rural small businesses which have historically operated with lower defaults than other sectors.”

The open-ended project finance vehicle has a year-one capital-raising target of $50 million to $75 million. The Premium Alziraea Fund has a one-year lock up, monthly liquidity windows on 90-180 days and will provide accumulation and distribution share classes in pounds sterling, US dollars and euros.

The fund has an IRR target of between 6 and 7 percent and will target a capital appreciation of between 5 and 7 percent per annum (net), with target annualized volatility of 1 percent and will operate without using leverage or performance fees.

“We are targeting sovereign wealth funds and we manage money for several of them from the Gulf region already,” Prestige Funds cofounder Craig Reeves told Agri Investor in April last year. “We’ve had discussions with different investors where they’ve said we’d give you more money if you had an Islamic structure and others have said we’d give you money if you had an Islamic structure.

“Not all of them start [by investing] $50 million. We’ve had several calls with some very large groups that are interested and some of them are looking at starting at $10 million or $20 million, and what they will do is rank that up over one to three years if certain milestones are hit.”

Prestige Funds will also pursue commitments from Islamic banks, insurance companies and family offices, and will use its Asia-based business development team to garner interest from Malaysian Islamic institutional and advisory investors.

The vehicle could end up raising “significantly more” than its first-year target, said Reeves, who cited the $500 million the group raised in 2020 made up of “$200 million in fund assets and $300 million of non-funds wholesale debt.” But they are trying to be realistic given the ongoing pandemic and the fact that it is a new vehicle.