Sharia compliant portfolio management

Islamic finance is a unique form of investment that is best compared with the values of socially responsible investing.

Shari’a-compliant portfolios promote large-scale investment along lines similar to the niche ethical funds available to Western consumers. It is an ethical and equitable mode of finance that derives its principles from Islamic law.

The main principles of Islamic Finance are:

Prohibition of interestMoney should be used to support productive economic ventures
Prohibition of uncertainty and gamblingAvoidance of economic transactions that are based upon uncertainty in both timing or quantum of any gain / loss
Mutuality / Profit and loss sharing / PartnershipIn an economic activity, when more than one party shares a risk, the risk each party faces individually is reduced
Ethics / Prohibition of forbidden activitiesAvoidance of activities that promote low ethical values, e.g. tobacco, alcohol, gambling, etc.

In building and managing a sharia portfolio it is vital that the wisdom of Shari’ah is paired with conventional skills to produce the best results.

CAPM strategic asset allocation for Islamic assets

Strategic asset allocation for a sharia portfolio

We maintain a global list of the best fund managers, securities and passive investments. Our expertise and forefront in this area has also seen us seed managers. Some investment groups will leave the sharia compliance to underlying managers or not perform annual reviews. Edale through its Salam Pax service has any investment approved prior to inclusion in a portfolio and an annual audit is performed to ensure all the assets and portfolio’s operation is sharia compliant.

There is a mistaken belief in some minds that Islamic investments are substandard in performance as they are constrained from participating within certain industries, like the conventional banking and entertainment industries. Our analysis shows Shari’a-compliant investments when compared to their conventional counterparts perform well.

To learn more about this type of investing and what Edale can offer, please contact us for further information.