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The Prestige Premium Alziraea Fund: Shariah compliant project finance in green energy
By Craig Reeves
Prestige Funds is a specialist direct lending fund manager which leverages the expertise of our lending partners in the UK. For over 15 years now we have provided investors with a means to access the dynamic economics of the SME sector in the UK, including the growing clean energy sector. CRAIG REEVES explains.
The UK has signed into law that it will be carbon-neutral by 2050. Currently, the UK puts more than 10 million tons of food waste into landfill sites which results in millions of tons of methane gas emissions escaping into the atmosphere. Methane gas is approximately 25 times more toxic than carbon emissions and approximately one quarter of global warming is attributed to this1.
The UK is an acknowledged world leader in clean energy technology and is in the process of transforming its economy to meet its net-zero emission commitments in 2050. This revolution in the energy sector is also creating much-needed jobs in rural communities.
While the UK already has the world's largest offshore wind farm (and is currently building a second), our renewables partner, Privilege Finance, provides project finance to biogas (anaerobic digestion) plants, which aid farms, food, agri-businesses and increasingly local communities in processing non-human organic waste into clean energy including natural gas at a time when gas prices are trading at a premium.
Through our discussions with many existing and prospective clients in the Islamic world, especially the Middle East, we realized there was a demand for an Islamic fund which specifically targeted this area of our work. Investors were interested in a fund which had the uncorrelated performance characteristics of a private debt fund and the underlying exposure to green energy projects, but which also met Islamic criteria.
Early in 2022, we launched the Premium Alziraea Fund (the Fund), a Shariah compliant real assets and project financing fund targeted at the renewables and agricultural sector in the UK. Seeded by an institutional investor in the Middle East, the Fund targets capital appreciation of 5–7% per annum (net) with target annualized volatility of 1% and operates without using leverage or performance fees.
The Fund's Shariah advisor is Sheikh Dr Mohamed Ali Elgari, a former professor of Islamic economics and a former director of the Center for Research in Islamic Economics at King Abdulaziz University, Jeddah, Saudi Arabia. He is a member of numerous Shariah boards of Islamic banks and Takaful companies worldwide.
Intesa Sanapaolo Private Bank (Suisse) Morval is the Islamic finance/arranger for the Fund.
The Cayman Islands-domiciled Fund invests in a diversified portfolio of secured asset and project-based finance projects, many of which may be or are backed by the UK government. The Fund's strategy has a low correlation to traditional public market equities, bonds or commodities.
The Fund has been designed to meet the requirements of allocators seeking Shariah investments with impact characteristics. It complies with established Shariah finance principles; the projects it backs are specifically screened to ensure that they comply with these principles.
The Fund operates as an open-ended Islamic finance vehicle although it has a one-year lockup and monthly/quarterly liquidity on 90–180 days dependent on the share class. It is aimed at Islamic institutional investors looking to diversify their investment portfolios and is available in accumulation and distribution share classes in GBP/US$/EUR currencies. The current investible opportunity pipeline stands at approximately GBP500–600 million/US$600–700 million over the next one to three years.
The Fund will follow a similar project/financing investment strategy as that managed by the Prestige Funds Group which has often generated positive, consistent, uncorrelated returns for more than 14 years and has approximately US$900 million of group strategy assets. The underlying portfolio has been screened to meet the criteria required for Islamic investments.
The Fund leverages the combined expertise of both the Prestige Funds Group and the considerable team of rural infrastructure financing experts at Privilege Finance. Based in Cambridge in the UK, Privilege draws on a team of more than 70 people with extensive commercial banking backgrounds and represents a considerable center of expertise for agricultural/renewable energy and waste-to-energy financing.
Privilege already backs one of the largest portfolios of on-farm clean energy projects in the UK in what is a small and specialist financing market. It is recognized as an expert in the field of bringing biogas projects online and is an active member of the UK Anaerobic Digestion and Biogas Association. The company celebrated its 20th birthday last year and has a proud track record of lending to businesses in the agricultural sector in the UK.
Privilege is recognized as a center of expertise within the UK anaerobic digestion space and has developed a consultancy arm called Eco Verde Energy which provides ongoing support and expertise for UK biogas projects. It is pioneering further work with the carbon capture and closed-circuit gas production sector of the economy.
With a strong focus on energy transition and energy security in the UK and across Europe, the Fund is well positioned to capture more of these opportunities.
Craig Reeves is the founder of Prestige Funds.
This commentary is issued by Prestige Fund Management Limited (PFM) which is a Cayman based Fund Management company registered with the Cayman Island Monetary Authority (CIMA). This commentary is for information purposes only, it is not a solicitation or invitation for investment into any investments or services managed, marketed or promoted by Prestige and should not be construed as financial advice. Investors should only rely on the relevant Information Memorandum/Private Placement Memorandum that accompanies any Investments or services managed, marketed or promoted by Prestige when considering an investment. Any past performance history shown within this document is no guide to future results. The Funds listed herein are experienced investor funds and are not intended for retail investors. If you are unsure of your classification, you should seek independent professional advice prior to making any decision to invest. The Funds are not for sale in the United Kingdom, Europe or the United States of America, its territories and possessions, or available for distribution to or investment by US investors.
ISFI Annual Report 2022
Companies in the Article
Intesa Sanapaolo Private Bank (Suisse) Morval
Prestige Funds
Privilege Finance
UK Anaerobic Digestion and Biogas Association
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