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Global Sharia Equity: DNA of a Manager Search
A detailed examination of a recent Global Equity search for an investor for whom Sharia compliance was critical. Part of bfinance’s popular ‘DNA of a Manager Search’ series.
IN THIS PAPER
There are very different methods for achieving Sharia compliance. Filters such as the MSCI Islamic World benchmark universe prove to be far more restrictive than alternative approaches.
The sector is wide open to new manager participants, with relevant investors keen to access strong global equity capability rather than prioritising Sharia experience. In this search, the final shortlist of six firms contained three managers that had no Sharia track record but proposed customising non-Sharia strategies.
Flexibility helps to ensure broader choice. There was a gulf between what this institution initially sought - a pooled vehicle, developed market equities only, at least $100m AuM – and what the market was able to deliver. In recent Sharia searches we have urged clients to consider a “two-tier” approach with more and less restrictive parameters.
The manger search analysed in this paper reveals a number of interesting lessons for investors considering Global Sharia Equity mandates and asset managers supplying such strategies.
bfinance recently conducted a Global Sharia Equities manager search on behalf of a large Middle Eastern institution. The RFP took place during a remarkably interesting period. With oil prices falling dramatically, a swathe of GCC-based investors were pulling money from external asset managers, leading to pressure on many Sharia equity pooled funds.
There has undoubtedly has been a strong trend towards Sharia investing and the growth of the Islamic finance market more broadly over the past five years. Yet moments of stress can provide an interesting test for the degree of asset manager commitment to this burgeoning sector.
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This commentary is for institutional investors classified as Professional Clients as per FCA handbook rules COBS 3.5R. It does not constitute investment research, a financial promotion or a recommendation of any instrument, strategy or provider. The accuracy of information obtained from third parties has not been independently verified. Opinions not guarantees: the findings and opinions expressed herein are the intellectual property of bfinance and are subject to change; they are not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets discussed. The value of investments can go down as well as up.
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