Prudent risk management is inherent in Islamic finance and there is an increasing recognition from both Muslim and non- Muslim investors of the link between the fundamentals of Shariah compliance, and those of ethical investment for disciplined growth. For the Shariah compliant investment industry this presents an opportunity for both Muslims and non-Muslims alike.
Shariah compliant funds provide access to investments based on two major screenings. The first is unacceptable business activities, which include companies involved in the production, sale or distribution of alcohol, tobacco, pork-related products, conventional financial services, entertainment (hotels, casinos, cinema), weapons and defence stocks. The second screening, following the removal of companies with unacceptable primary business activities, is to evaluate the remaining stocks according to several financial ratio filters, designed to eradicate companies with unacceptable levels of debt, receivables or income arising from interest.
Previously offered only through discretionary services, the Islamic finance industry, now estimated at a trillion dollars, gives pause for thought. As the number of high net worth individuals and institutions investing in Shariah compliant funds has grown, the number of global Islamic indices providing performance benchmarks has also grown.
Dow Jones, FTSE, S&P and MSCI have all launched their own Shariah compliant indices across varying geographical regions, sectors and asset classes. In fact, the MSCI World Islamic Index has delivered a sturdy track record with lower volatility than its conventional counterpart, the MSCI World Index. Such figures show that Shariah indices, when compared to conventional indices, actually performed better throughout the credit crisis.
A number of widely recognised institutions have taken notice of this growing industry. HSBC Amanah, the Islamic banking arm of HSBC, has developed its own Shariah compliant range of funds and sees the healthy growth potential of this niche market.
One of the HSBC Amanah funds, available to invest in through RL360°’s PIMS single premium portfolio bond and its regular premium savings products Quantum and Paragon, is the HSBC Amanah Global Equity Fund. This aims to create long-term appreciation of capital through investment in a well diversified portfolio of equities, in a manner that is consistent with the principles of Shariah law.
Investors have access to equity markets through an experienced manager, with daily liquidity and the highest standard of compliance with Islamic principles. This is an actively managed fund and is designed for investors who want exposure to global equities consistent with the principles of Shariah law.
To find out more about Shariah compliant services and investment solutions, please do not hesitate to contact your RL360° International Sales Manager.