Herbert Smith Freehills advises Malaysia’s EPF on launch of world’s first and largest Shariah private equity SMA fund

Leading global law firm Herbert Smith Freehills has advised Malaysia’s Employees Provident Fund (EPF) on the launch of its Shariah Private Equity (PE) Direct/Co-Investment Separate Managed Account (SMA) fund which has an allocation of US$600 million.

The EPF is the first institutional investor globally to establish a Shariah-compliant fund of this kind, and it is also the largest fund of its type globally.

The provident fund is one of the world’s largest retirement funds, investing on behalf of over 14.6 million members.

“We’re delighted to have helped the EPF launch this world-first fund,” said partners Glynn Cooper and Stephen Newby, who advised the provident fund. “The EPF’s innovation will help to diversify its investment portfolio and ensure that it can continue to provide sustainable returns to its many members.”

The fund will comprise three SMAs of US$200 million each, with each SMA managed by a separate private equity fund manager — BlackRock, HarbourVest Partners LLC and Partners Group AG. The funds have a global mandate focusing on direct and co-investment strategies into growth and buyout transactions.

"The investment period is from 2021 to 2025, while the fund term will run from 2021 to 2031, subject to further extensions with the EPF’s consent," said Asia Pacific Islamic Finance Lead Sophie Lenox.  "The SMAs are structured based on either a wakalah structure, or a combination of both wakalah and murabahah structures, and will be subject to Shariah investment guidelines."

The SMAs have appointed Shariah advisors Amanie Advisors Ltd, Dubai, and ZICO Shariah Advisory Services Sdn Bhd to ensure that the investments are Shariah-compliant.

Stephen led the team advising EPF with support from Glynn, assisted by senior associate Ben Tooms in London, counsel Geoffroy Hermanns in Dubai and Asia Pacific Islamic Finance Lead Sophie Lenox in Singapore.