7/11/08

There are Islamic Shariah Compliant Investments. Are there any Jewish Halakhah Compliant Investments?

Watch out - Goldman Sachs and AIG are not Shariah compliant.

Shariah compliant investment vehicles take socially responsible investing (SRI) to a new level, proving that conscious investing does not necessarily depress returns. Hedge funds can turn to specialty shops that specialize in weeding out investments that violate Islamic Law. Non-accredited investors (investors with less than $1 million to invest) can also gain admission by following Shariah indexes or mutual funds.

Investing Under Islamic Law
Islamic law does not permit investors to derive benefits from interest paid on loans, the sale of pork, firearms, and other sin investments related to pornography, gambling, alcohol or tobacco. Institutions that engage in short selling and the use of leverage are also frowned upon since borrowing goes against one of the basic principles of Islamic law. Following these rules cancels out the possibility of investing in investment banking firms like Goldman Sachs (NYSE:GS), insurers like AIG (NYSE:AIG) and other financial service firms that use derivatives as a way to boost their profits. (To learn more, read What is an Islamic investment policy?)

Islamic Law Hedge Fund Advisor
Shariah Capital, one of the world's best Islamic financial institutions according to Global Finance Magazine, is one resource hedge fund managers turn to when developing strategies to meet the Shariah compliance needs of their clients. Islamic law scholars and attorneys work with clients to find suitable investments and devise products that attempt to mirror strategies involving short selling and the use of leverage.

Shariah Indexes for Individual Investors
Standard & Poor's (S&P) has compiled more than 20 Shariah indexes focusing on specific countries, such as Japan or emerging markets and broad categories like global infrastructure and global property. Individual investors can begin by focusing on two broad Shariah-compliant equity indexes introduced by S&P earlier this year. The S&P CNX Nifty Shariah Index and the larger S&P CNX 500 Shariah Index are both in partnership with India's National Stock Exchange. Indian outsourcer Infosys (NASDAQ:INFY) is the most familiar stock among the top three holdings on each index. The other top holdings of each include, oil conglomerates, reliance industries and India's largest engineering company Larsen & Toubro (OTC:LTOUF).

Shariah Compliant Funds
The Amana Trust Income Fund (AMANX) also helps investors take the guess work out of choosing Shariah compliant investments. The fund is almost completely void of financial service companies enabling it to outperform the Standard & Poor's 500 Index (S&P 500) by roughly 6% a year to date. The AMANX fund has a three and five year return of 11.72% and 15.78% respectively. The funds top three holdings, include United States Steel (NYSE:X), energy company FPL Group (NYSE:FPL) and natural gas company EnCana Corporation (NYSE:ECA). The Iman K Fund (IMANX) is a much smaller Shariah compliant fund with a similar focus.

Conclusion
Socially responsible investing is growing in the U.S. Investors should know the rules other cultures incorporate into their socially conscious investment decisions. In addition to the social benefit derived from choosing investments based on Islamic laws the strategy has also proved to yield positive returns for its investors.

6 comments:

John D. Enright said...

You surprise me, Rabbi. Based on your post regarding the evil U.S. Oil Companies, I assumed that you would be more sophisticated at finance than this. (Not really, since your opinion on oil was, well, a load of gas!)

If you want Israeli compliant investments, just do a google search such as: http://www.google.com/search?source=ig&hl=en&rlz=&=&q=%2B%22israel+friendly+mutual+funds%22&btnG=Google+Search

Tzvee said...

we are not talking israel friendly here - we are talking compliant with the rabbinic halakhah - jewish law.

john, do you work for the cia?

John D. Enright said...

Sorry, Rabbi, if I tell you, I'd have to kill you. Just kidding! I assumed, probably a bad thing to do, that Israeli friendly funds would also be in accordance with Jewish Law since the Orthodox wouldn't have it any other way. I don't think that I have to do all of the work for you. I only did a quick google search using the word "Israel." In the results, you could probably find your answer. If not, you could narrow the search.

If your don't find what you seek, well then, I guess there's a business opportunity for you! Take advantage of it, Rabbi.

Tzvee said...

i knew that you do work for the cia and i am flattered that you have been assigned to monitor my blog....

John D. Enright said...

Can you say paranoia? Sure, I knew that you could.

mother in israel said...

I have seen ads for halacha compliant funds, but I don't remember the details.