Khaleej Finance & Investment, a Bahrain investment bank, is pitching a 100% capital protected fund linked to a basket of options on the Dow Jones Islamic Index, crude oil and copper prices. KFI Optimum is being marketed to private investors in the Persian Gulf.
The structure has three-year and four-year options, which have a minimum return of 10% and 12% at maturity, respectively. The three-year would, for example, gain a minimum of 3.33% each year. Performance is captured every month, reducing the risk of last minute downturns in the market and the highest weight is allocated to the best performing of the three assets, while the lowest weight is given to the worst. According to fund literature, the high returns are generated by underlyings "driven by strong economic fundamentals, rather than by mere asset bubble speculative positioning."
Hasan Habib Hasan, director of treasury and financial institutions, said there is demand for exposure to the underlying assets. There is a "tremendous shortage of refined copper, and room for huge growth," he said. Hasan acknowledged oil levels have stagnated recently, but expects them pick up shortly as a result of the chaos caused by the U.S. involvement in the gulf area. "We will see it hitting a USD100 per barrel."
