SHARIA COMPLIANT FUND HOW TO

SaturnaвЂ™s oldest fund, the Amana Income Fund, has a five-year return of 13 percent, compared with more than 17 percent for the S&P 500. For example, if an airline like Emirates needs a new plane, it can borrow the money from the sukuk market and the obligation is structured as a lease of that plane to the sukuk. Instead of earning interest on the bonds, investors receive a lease payment from the sukuk. To add diversification, Saturna has recently added the Islamic equivalent of a fixed-income fund, which invests in the market for sukuk, which are bondlike instruments. вЂњIn an ideal world, weвЂ™d be buying something that is 100 percent compliant, but thatвЂ™s just not possible,вЂќ Mr. In that case, the fund will look to see if the company gets less than 5 percent of its revenue from something that is prohibited. He also screens companies that have a small portion of their earnings in forbidden revenue, like an airline that sells alcohol. While a portfolio with Apple holds lots of cash, it is not enough to violate the prohibition, but it is a number the fund monitors. He steers away from companies that are cash rich, because there is a prohibition on trading in them when more than 45 percent of their balance sheet is in cash. He said he also looked for companies that did not have excessive debt, because debt is acceptable only in cases of necessity. So he can invest in Islamic banks, for instance, or in beverage makers like Monster, which may have been excluded under a broad screen. Salam said he also looked at the companies themselves. One is to avoid any investment prohibited by Islam, which includes banks, insurance, tobacco, alcohol and pornography. The Islamic faith prohibits earning interest, but the organization has created a way for companies to borrow money to expand their operations. Monem Salam, executive vice president and portfolio manager at Saturna Capital, which invests along Islamic principles, said he had two main criteria for making investments for SaturnaвЂ™s four funds - three in stocks and one in fixed income. For instance, investors are allowed to back a company only if it derives no more than 5 percent of its revenue from something that is prohibited like the sale of alcohol.

SHARIA COMPLIANT FUND HOW TO

Islam has a governing body known as the Accounting and Auditing Organization for Islamic Financial Institutions that sets guidelines on how to invest in an Islamic-compliant way. For Catholics, the United States Council of Catholic Bishops has issued six principles as guidance - including protecting human life, pursuing economic justice and protecting the environment - though interpreting those principles is up to individual investors. People who invest in line with their Jewish faith often embrace the principle of tikkun olam, which calls for people to leave the world a better place. But some provide more guidance than others. In some ways, investing along faith-based lines isnвЂ™t that much different from one religion to another. вЂњWe now have this lived experience of our interdependence.вЂќДЄs with investing with environmental, social and governance criteria, faith-based investing allows people to adhere to the tenets of their faith while still having a diversified portfolio, albeit with some exceptions. вЂњThe pandemic brought to light our collective interdependence and vulnerability,вЂќ she said. VanderBrug added that the pandemic and the social unrest that began last summer with George FloydвЂ™s killing had prompted more people to look to their faith and to invest in a way that expressed their values. We can say now that you donвЂ™t have to give up risk-adjusted returns to invest this way.вЂќ вЂњIn the past, clients would have been told that faith-based investing is a great way to lose money. вЂњWhat weвЂ™ve seen is faith-based investing, like sustainable investing over all, is much easier to do now than it has been in the past,вЂќ said Jackie VanderBrug, head of sustainable and impact investing in the chief investment office at Bank of America. In some cases, people are choosing to participate in what they see as a solid investing strategy regardless of its religious tenets. There are Islamic exchange-traded funds and real estate investment trusts, Jewish venture capital funds and Catholic separately managed accounts.ДЄnd these strategies are not just attracting investors of the same faith. The intersection of faith and money can be complicated.Д«ut investing by the tenets of your faith has become easier, and in many cases itвЂ™s neither less profitable nor more risky than investing without a religious screen.

Sharia compliant fund