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(Free-Press-Release.com) March 21, 2010 -- Shariah funds see above average returns

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/finance/Shariah-funds-see-above-average-returns/articleshow/5670056.cms

KOLKATA: This may come as a surprise. But Shariah or ethical funds, which are compliant with Islamic investment laws and available from only insurers — Bajaj Allianz Life Insurance — are doing much better in terms of returns on investment (RoI) than a host of traditional funds.

Though total assets under management for these funds in the insurance sector is a modest Rs 525 crore, which has been mopped up over the last 3-4 years, returns were as high as 109% compared to the CNX NSE Nifty Index, which registered a 70% growth during the same period.

Islamic investment laws, popularly known as ‘Sharia’, disallow profitmaking from interest. Neither can these funds invest in equities of companies that are into gambling, lottery /contests, animal produce, liquor, tobacco, entertainment like films, or in hotels, banks and financial institutions.

Such lines of business are considered ‘Haram’ — as in ‘forbidden’ under Islamic Laws, which is why all Shariah-complaint funds (ethical funds) do not invest in them.

“Interestingly, India offers more Shariah-compliant stocks than any Islamic country, and according to Taqwaa Advisory and Sharia Investment Solutions (TASIS) — the leading agency for making financial instruments Shariah-compliant , 20% of the market cap in BSE as well as NSE are from Shariat-compliant stocks,” said Sashi Krishnan, chief investment officer at Bajaj Allianz.

“Bajaj Allianz has been managing its Pure Stock and Pure Equity Fund for over five years, which are based on ethical investment principles similar to Shariah norms. The company’s total assets under management for Shariah-complaint funds are around Rs 418 crore and returns have been extremely high. For instance, the Pure Stock Fund garnered a 97% return in comparison to the Nifty index fund which was 72% in the last six months,” said Mr Krishnan. Tata AIG recently entered the fray with three funds. “We have already mopped up around Rs 105 crore for these funds in about a year.

These funds offered a 10% higher return than the Shariah 500 Index,” said Tata AIG Life chief investment officer Saravana Kumar Ananthan.

“Insurance, per se, does not comply with Shariah laws, and hence, we do not have a Shariah-certified insurance policy that is linked to any of our ethical funds. But we have launched a pension plan that is Shariah certified. It is a niche product but the fund is doing very well,” added Mr Krishnan.

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