Alexander Forbes has launched the first ever Shari’ah Manager Watchᵀᴹ Survey. With Shari’ah finance and investment increasing in popularity, Alexander Forbes believes the Shari’ah Manager Watchᵀᴹ Survey will provide a guideline for people looking to invest based on Islamic principles as well as those just looking to diversify their portfolios.
At least nine managers, represented by 21 portfolios with a total market value of more than R20 billion, participated in the survey which was carried out in September 2018 and whose results have just been released, says Don Andrews, Surveys Manager, from Alexander Forbes. The survey consists of two categories: balanced and equity mandates.
In line with Shari’ah principles, some sectors of the equity market such as banking, beverages, entertainment and media are excluded. This may result in differences in returns (higher or lower) of SA Shari’ah Equity portfolios compared to SA Equity portfolios.
Andrews says looking at the average returns for the SA Shari’ah Equity funds participating in the survey over the one, three and five year periods as at 30 September 2018, it is clear from the table below that, on average, SA Shari’ah Equity funds have outperformed the SA Equity funds in the AF Equity survey.
| Sep-18
| SA Shari’ah Equity Funds in the AF Shari’ah survey | SA Equity Funds in the AF Equity survey | ||||
| 1 year | 3 years | 5 years | 1 year | 3 years | 5 years | |
| Average | 5.70% | 8.42% | 8.54% | 1.53% | 5.49% | 7.21% |
Source: Alexander Forbes Shari’ah and SA Equity surveys
”Shari’ah investing is for people looking to invest based on Islamic principles as well as those just looking to diversify their portfolios. These principals dictate that a Shari’ah-compliant portfolio may not invest in interest bearing instruments or any business which is considered forbidden according to Shari’ah law such as alcohol, pork products, weaponry, gambling and pornography.
“As a result of having a substantially reduced investment universe where sectors such as banking, beverages, entertainment and media are excluded, there is a perception that Shari’ah portfolio returns will always be lower than those from conventional equity portfolios,” Andrews says.
“For many Muslim investors, there are benefits in that the portfolios are governed by Islamic law, but in terms of a Non-Muslim investor, people should overcome misconceptions about investing in Shari’ah-compliant products. One of the main benefits of investing in such products is that you will be diversifying your investment portfolio,” he says.
