Islamic finance specialist Crescent Finance has launched two innovative investment funds that for the first time will give the clients of Australian financial planners, Self-Managed Super Funds and institutional investors access to a fully diversified portfolio of hundreds of Australian residential properties.
Chaired by economist and former Liberal Party leader Dr John Hewson, the company’s flagship Crescent Growth Fund will give investors access to leveraged capital appreciation of the value of residential real estate in a broad portfolio that spans Australia’s property markets.
Residential Australian real estate has returned an average of 10.1% p.a. over the past 25 years. The companion Crescent Finance Income Fund will give investors access to rent received from the growth fund’s residential properties leased out to tenants with targeted returns of 3% – 4.45% p.a.
The funds expect to raise an initial $100 million by the end of this year and finance more than $5 billion of property transactions over the next five years.
Crescent Finance Managing Director Dr Sayd Farook said that as well as giving investors unprecedented access to ‘safe as houses’ pooled residential real estate, his company sought to turn two problems into investment opportunities.
The first was to find a way to meet strong demand from institutional investors, especially those from Southeast Asia that wanted to invest in Australia’ residential property market in an Islamically compliant way. Crescent Finance will achieve this through the structure of both funds, which will be endorsed by world renowned scholars.
Because the funds will be Islamically compliant, this in turn will allow them to be a source of residential finance for hundreds of thousands of Australians who cannot participate in Australia’s property market due to the lack of authentic Islamic options that avoid the paying of interest, which is forbidden in Islam.
Dr Farook, who is the former Global Head of Islamic Capital markets for Thomson Reuters, said the authenticity of Crescent Finance’s approach to Islamic finance set it apart.
“Crescent Finance – unlike other Islamic Finance institutions, plans to provide authentic structures whereby they co-invest funds that are not simply borrowed from a conventional bank at an interest rate and wrapped in legalese to make them appear Islamically compliant.
“Such providers have been around for many years and in effect are mortgage broking firms with a twist and do not pass the basic smell test on ‘where did you get your money from?’ Crescent Finance plans to answer that question decisively and transparently,” he said.
The potential size of the market for Islamic residential finance in Australia is estimated to be almost $200 billion. In Australia 42% of Muslims are married and Australian Muslim women have 2.5 children on average and yet only 15% of Muslims own their own homes.
Dr Farook said Crescent Finance funds would be available for investment for everyone and not just Muslims and would be offered to anyone who wanted an equitable and ethical partnership-based approach to financing their homes.
“One of our first customers is not Muslim and wants to use the legal infrastructure to purchase properties for his children using a self-managed super fund,” he added.
Dr Hewson, a long-term supporter of Islamic Finance in Australia, said he was pleased to be able to help steer the launch of the two innovate financial products. “What excites me most is the equitable and social implications of the funds, allowing younger and previously excluded Australians to enter the residential property market, which has become increasingly unaffordable and inaccessible, given the stratospheric rise in property values relative to incomes
“I also believe that these products will have significant appeal to a wide cross-section of Australians who are looking for ‘integrity and transparency’ in financial planning after the excesses and abuses identified by the Hayne Royal Commission,” Dr Hewson said.
Crescent Finance was established in 2020 to provide Islamically compliant residential finance. It is part of the Crescent Group which also includes the Crescent Wealth Islamic super fund which has a member base of more than 10,000 and manages approximately $300 million in funds, as well as not-for-profit entities the Crescent Institute and the Crescent Foundation.
Apart from Dr John Hewson, Crescent Finance’s board members include Miriam Silva, member of the board of CEDA, Keri Pratt, Non-Executive Director for several superannuation trustees and financial institutions, Professor Talal Yassine, Managing Director of Crescent Wealth, and Dr Farook, who until recently was Strategy and Innovation Advisor to the Office of the Vice President and Prime Minister of the UAE and Ruler of Dubai.