Al Rajhi Endowment Fund

The Shariah compliant open-ended Al Rajhi Endowment Fund opened for subscription on the 1^st September 2024 for 40 business days until the 28^th October 2024, with minimum SAR1 (US$0.27) for both initial and subsequent investments.

The fund’s operations can start earlier if a minimum SAR1 million (US$266,250) is received. If this minimum isn’t achieved by the initial deadline, the offer period can be extended by another 20 business days.

Due to the nature of the endowment fund, all subscriptions cannot be refunded or transferred – unless the minimum amount threshold cannot be met despite the extended offer period.

The offering is open to all individuals and institutions recognized by Saudi Arabian laws, with unlimited units of equal value, all of the same class, that can be issued by the fund manager Al Rajhi Capital. Subscription is via electronic channels provided by Al Rajhi Capital and also at its branches.

Once operational, the fund can be invested in multiple asset classes – including money markets, debt and fixed income instruments, stock markets, real estate exchange-traded funds and income-generating real estate funds, private funds and multi-asset funds.

The prospectus states that the fund can also invest in futures, options, forwards, swaps and other derivative contracts – provided that they are compatible with specified Shariah controls. Geographically, this fund can invest in both domestic Saudi Arabian and international markets.

While a minimum 30% of the fund would be held as cash, investments, funds and money market transactions, caps of 50% are set for real estate income funds and real estate exchange traded funds plus multi-asset funds and general funds.

The maximum investment in privately-offered funds is 25% of the fund’s net asset value (NAV). Despite a focus on investment grade instruments, rated at a minimum of S&P’s ‘BBB-’ or Moody’s ‘3Baa’ or Fitch ‘BBB-’, a maximum 20% of the fund’s NAV can be invested lower-rated instruments if internal assessments find the issuing entities have sufficient capacity to meet financial obligations.

Further, up to 30% NAV of the fund’s assets can be pledged as security for Shariah compliant financing – capped at 15% of NAV – with the aim of enhancing the fund’s assets, after obtaining the approval of the fund’s board of directors.

The fund’s strategy does not track a benchmark but a composite index will be used to compare the performance – which includes SAIBOR 3M (60%), S&P Saudi REIT Shariah Index (25%) and S&P Saudi Shariah Index (15%).

Annual distribution is scheduled to start after the fund’s first financial year ends on the 31^st December 2025, with a minimum 50% from investment profits and/or capital gains.

The beneficiaries are selected from non-profit entities, including charitable associations, recognized by the Saudi National Center for Non-Profit Sector and the Council of Civil Associations. The fund manager will conduct a review every six months on whether to add more beneficiaries.

*Disclaimer:  The opinions and viewpoints expressed in the Fund Profile do not constitute as a recommendation for any funds highlighted. The information presented is not investment advice and should not be treated as such.