Friday, July 4, 2008

NY firm on private equity funds

While Shariah compliance adds an additional layer of complexity to a fund, traditional private equity funds are uniquely positioned to take advantage of the growing market in the Middle East, says a client note from New York-based legal firm Latham & Watkins.

It said due to its investments in equity and risk sharing between investors and management, the traditional private equity fund fits nicely within the Shariah paradigm, adding that the standard management structure of a private equity fund is permissible under Shariah.

On Shariah supervision, the report noted that most Middle East private equity funds simply engage an already existing Shariah board (typically the Shariah supervisory board of the fund's sponsor or anchor investor). Alternatively, a fund may hire a Shariah consultant or establish its own Shariah supervisory board comprised of various Islamic scholars.