Amiri Capital, the Islamic asset manager backed by investment firm Olivant, said it has teamed up with broker Newedge to launch the first Islamic fund of long/short hedge funds marketed in the Middle East.

The partnership with Newedge - itself a joint venture between Calyon and Societe Generale - allows Amiri to launch the fund, which was put on hold when original partner Lehman Brothers filed for bankruptcy protection in September.

Hedge funds are a relatively new concept in Islamic finance and a bone of contention, with some scholars rejecting them as speculative and others sanctioning them as a tool for diversification.

The Amiri Equity Alternative Strategies Fund (AEAS) will operate under the same Sharia-compliant structure agreed with Lehman Brothers to avoid short selling, which involves profiting as a stock price falls.

Islamic fund managers cannot sell something they do not own, and cannot speculate either.

The Cayman-Islands domiciled fund will implement a stock screening process to exclude certain types of derivatives, companies charging interest, highly leveraged firms or companies directly or indirectly involved with gambling, alcohol, pornography and pork meat production.

Amiri co-founder Richard Ellis told Reuters that Gulf-based investors have pledged assets to the fund of funds but investments will be made when the market shows signs of improvement.

'We are working with our seed investors to agree a time to invest in the market. We are waiting right now, but it will hopefully be soon,' Ellis said.

Philippe Teilhard de Chardin, global head of prime brokerage at Newedge, said: 'It is a small and developing market and it is important to neutralise costs.

'Hedge funds fill up a risk/return spectrum which is between equity and money market type of returns,' he said.-Reuters