U.S. Connecticut-based Shariah Capital predicts that more Shariah-compliant hedge funds will likely be launched, specializing in healthcare, telecommunications, and technology stocks.

According to Reuters, thus far, Islamic hedge funds have had trouble getting off the ground, due to the prohibitions against speculative financial techniques and transactions that are commonplace in hedge funds, derivatives, and other sophisticated financial investment tools. But now, the $1 trillion Islamic finance industry is broadening its reach into areas that were strictly off limits. In recent years, there have been increasing developments in, for example, issuance of credit cards that are Islamic-compliant, as well as hedge funds and derivatives trading.

Earlier this month, IIFM, an Islamic finance industry body, with the backing of a derivatives association and banks such as Credit Agricole (CAGR.PA) and Standard Chartered (STAN.L), launched a template over-the-counter Islamic derivative contract. The move was intended to address concerns by industry practitioners and scholars about the extent to which derivatives trading comports with traditional Shariah principles.

There is no doubt that there will be more attention paid to Shariah-compliant financial products as the industry continues to grow. For more information on the challenges posed to financial instruments and common diversification techniques or products by Islamic principles, please contact the attorneys at Ice Miller at info@islamic-finance-blog.com.

For the original Reuters story, please click here: http://www.reuters.com/article/idUKSGE61308Z20100311