Asset management activities in Qatar are regulated by several laws. A fund may take the form of a joint stock company, limited liability or limited partnership and must be incorporated in Qatar.
As funds are regarded as financial institutions by the Qatar Central Bank Law, incorporation of an investment fund must be approved by the Qatar Central Bank. Closed-end and open-ended funds are permitted.
Funds may also list their units on the Qatar Exchange. Listing of units is approved by the Qatar Financial Markets Authority (QFMA). The listing allows for offering the units to the public in Qatar and trading the units on the Qatar Exchange, which makes the fund more liquid.
Recently, the QFMA issued special rules for listing real estate funds. For a real estate fund to be listed, it is required to have a capital of 40 million Qatari riyals ($11 million) and should offer at least 25% of its capital to the public. There should be at least 30 unit holders in a real estate fund. A real estate fund may invest, directly or indirectly, in local or offshore properties provided that not more than 10% of its capital is invested in other real estate funds.
COMPLIANCE REQUIRED
The Qatar Central Bank Instructions also deal with real estate funds. According to the instructions, real estate funds may only borrow up to 25% of their net asset value for liquidity purposes only. The Qatar Central Bank also has compliance requirements for real estate funds. For example, a real estate fund should obtain a valuation report for the property purchased by the fund and the property should be duly registered and free of any encumbrances.
To list investment funds other than real estate funds, the capital of the fund should be at least 10 million Qatari riyals. An investment fund should not concentrate its investment with a single issuer or other investment funds more than 10%. A fund should also limit the investment in the securities of a single issuer to 15% of the fund’s net asset value. Such measures applied by the QFMA are intended to minimise the risk of concentrated investment and therefore prevent disruption in the economy. Index funds should comply with percentages provided by the relevant index.
Presently, there are a number of Qatari investment funds licensed by the Qatar Central Bank, which are open for Qatari nationals and foreigners. The restriction on foreign ownership under the Foreign Investment Law is currently 49%. Accordingly, investing in investment funds in Qatar by non-Qataris is limited to 49% of the capital of a fund. However, this percentage may be increased by the Council of Ministers.
APPROVAL NEEDED
So far, none of the existing investment funds have listed their units on the Qatar Exchange. The listing rules of funds are relatively new (rules for listing investment funds were issued in 2012 and the listing rules for real estate funds were issued in 2015). Foreign funds may also list on Qatar Exchange provided the QFMA has approved the listing application.
Sharia-compliant funds are required by the Qatar Central Bank to appoint a supervisory board or a sharia counsel to determine the rules that the fund should comply with in managing its investments.
Sarah El Serafy, senior associate, banking and finance, Al Tamimi, Qatar office
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