Stephen Gunnion
19 November 2008
Johannesburg — US-BASED asset manager SEI is targeting Muslim and other investors wanting to increase their offshore exposure with a range of sharia-compliant investment funds.
The funds, which include US, European, emerging market and Pacific Basin equities funds, are registered with the Financial Services Board and comply with Islamic investment principles.
Islamic law forbids Muslims from receiving interest income as well as income from a range of non-permissible sources, including investments in financial services, pornography, gambling, non-halaal foods, weapons and alcohol.
Southern Africa has an estimated Muslim population of 3,5- million people and the number of sharia-compliant products has increased significantly in the past few years, including banking and investments. Other financial services groups offering such products include Nedbank, Absa, First National Bank, Old Mutual, Oasis and Frater Asset Management.
SEI said it was advised by a sharia board on investment objectives, guidelines, contracts and portfolio reviews to ensure strict compliance.
It said the funds were benchmarked against the Dow Jones Islamic world index which covers more than 1600 sharia-compliant companies with a market capitalisation of more than $9-trillion.
SEI SA MD Rudolf Schmidt said the funds were successfully launched in Europe last year and SEI saw potential for growth in the South African market.
Mark Parsonson, senior client investment strategist for SEI's African business, said Sharia- compliant products such as SEI's funds should perform in line with non-sharia funds over the long run. However, at the onset of the market crisis, he said they had outperformed traditional products due to a large underweight in financial stocks. As the fear of recession spread to other market sectors, he said they had started to underperform because of their exposure to sectors such as materials and energy.
Parsonson said sharia-compliant funds would also appeal to non-Muslim investors who wanted to diversify their portfolios and also those investors who had similar investment beliefs.
Because SEI used the manager-of-managers process, Parsonson said there was an extra assurance that products remained consistent with sharia principles and were assessed daily.
Despite the rand's recent weakness, he said, investors should still consider offshore investments to diversify their portfolios.
"The current market volatility has made this even more clear," he said.
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