Sidra Capital, a Shari'ah-compliant asset management firm headquartered in Saudi Arabia, has launched its first Singapore-domiciled Sidra Asian Opportunities Investment I variable capital company (VCC), a new corporate structure for Singaporean investment funds.

Letters of credit (L/Cs) are used in the VCC's structure to secure its strategy to invest in commodity trade finance transactions in Asia.

Irrevocable L/Cs

The VCC was launched with an investment strategy focused on facilitating cross-border commodity supply chains via fully funded irrevocable L/Cs.

It specifically targets the high demand for solid fuel produced by select Indonesian producers, valued for their product quality and ability to deliver the expected quantity and quality to purchasers.

Enhanced security

To enhance security the underlying trades are secured end-to-end by US dollar-denominated L/Cs issued or confirmed by banks with strong credit ratings, which eliminates foreign exchange and payment risks.

The trades are also structured as back-to-back purchases and sales of commodities rather than speculative trading, investors are not exposed to inventory and price risks.

Private Islamic finance

Sidra Capital has established itself as a pioneer of Shari'ah-compliant private finance investment solutions in Saudi Arabia.

Founded in 2009 and headquartered in Jeddah, it also has offices in Riyadh, London, Dubai and Singapore.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.