Why there is huge value in SA’s Islamic investment funds
A number of SA’s product providers were recognised at the Global Islamic Finance Awards (Gifa) held in Cape Town recently
Users of Islamic banking and investment products in SA should be encouraged after a number of the country’s product providers were recognised at the Global Islamic Finance Awards (Gifa) held in Cape Town recently.
The annual award ceremony, now in its ninth year, recognises Islamic financial products and institutions from around the world and makes a large number of awards for a variety of financial services from banking and micro-finance, to asset management, advice, education, credit rating and even auditing.
But among the 63 accolades given to representatives from more than 20 countries, local providers scooped the global awards for the best Islamic fund manager, the best Islamic fund, the best Islamic balanced fund and the best Islamic banking window.
The Oasis Crescent Equity Fund, a fund managed from Cape Town, took top honours as the best Islamic fund globally and Oasis’s Irish offshore arm, Oasis Global Management Company, was recognised as the best Islamic fund manager.
Oasis was also honoured for its work in promoting Shari’ah-compliant investments with the Gifa’s advocacy award, which is one of the five Gifa championship awards.
FNB won for the third year in a row a “notable” award for the best Islamic banking window — a banking window within a traditional bank.
The Old Mutual Albaraka Balanced Fund was the recipient of the best Islamic balanced fund award, Kagiso Asset Management won the emerging Islamic asset manager award, and Absa won the award for its NewFunds Shari’ah Top40 ETF product in the Islamic asset management category.
At the ceremony, President Cyril Ramaphosa was also recognised with the Gifa leadership award 2019 for his support and efforts to provide a level-playing field to Islamic banking and finance in SA.
There is no equity fund, locally or even globally, that has delivered what this fund has on an annualised basis, over the time period assessed.Oasis CEO Adam Ebrahim
Unlike many other investment awards, the focus is not only on performance but also on the application of Shari’ah principles, the quantity and quality of the offering and its distribution beyond the borders of its home country.
The Gifa awards is a not-for-profit initiative of Cambridge International Financial Advisory, a financial services intelligence company and member of the HD-Edbiz Group, and particularly of Humayon Dar, Gifa founder and chair.
Entrants for the awards are nominated and then scored by the Gifa programme committee, which uses a formula for factors such as the amount contributed to social causes, whether a product is plain vanilla or sophisticated, and conferences attended.
Three other key considerations are a commitment to Islamic banking and finance, social responsibility and Shari’ah authenticity. “An organisation is considered Shari’ah authentic if it commits itself to the Shari’ah standards issued by an independent body such as the Accounting and Auditing Organisation for Islamic Finance Institutions (AAOIFI) or a national body set up to issue Shari’ah guidelines,” the Gifa website explains. “Preference is given to AAOIFI.”
The awards are among the most highly sought-after Islamic banking and finance accolades in the world, Saliegh Salaam, portfolio manager at Old Mutual Investment Group, says.
Oasis CEO Adam Ebrahim says what differentiates Islamic finance is that leverage and exposure to debt is limited, but as a result, so too is risk. Interest is not permissible either, and so conventional banking products that pay interest are excluded.
Another key differentiator is that Shari’ah-compliant products need to be socially responsible, typically excluding investments in businesses promoting alcohol and casinos. They are also required to fulfil social responsibilities to society at large.
Ebrahim says Oasis’s award for advocacy follows the initial groundwork they covered to enable Islamic investment to establish itself into the industry it represents in this country today.
“In response to an unmet need for ethical finance and wealth management, we developed the products and strategy, adopted global standards set by global regulatory agencies, and brought these into the SA regulatory framework.”
The Oasis Crescent Management Company manages more than R15bn in 14 collective investment schemes. Ebrahim says the Oasis Crescent Equity Fund won the award for best Islamic fund over a 20-year period. Since the inception of the fund in 1998 to March 31 2019, the fund’s annual average return has exceeded 17% a year, while its 10-year annual average return to the end of August is 9.1%.
“There is no equity fund, locally or even globally, that has delivered what this fund has on an annualised basis, over the time period assessed,” he says.
The fund was the first regulated collective investment scheme in SA that satisfied the globally accepted Shari’ah compliant investment standards. Oasis’s global management company manages offshore funds domiciled in Ireland.
Kagiso offers four different Shari’ah compliant unit trust funds, of which their Islamic Equity Fund, established in 2009, has returned 9.6% a year over the past 10 years to the end of August. It has beaten the average for SA general equity funds by 0.8 percentage points a year since inception, Abdul Azeez Davids, the portfolio manager for Islamic funds at Kagiso says.
The Old Mutual Albaraka Balanced Fund is a fund that invests beyond equities into Shari’ah-compliant bonds or sukuks and deposits as well as in property.
This makes it suitable for retirement investments.
The fund has delivered an annualised return of 7.6% over seven years to the end of August and Salaam says the fund has contributed millions of rand to education, healthcare and poverty alleviation through the SA Muslim Charitable Trust.
Absa’s NewFunds Shari'ah Top 40 ETF tracks the FTSE and JSE Shari’ah Top 40 Index and has returned 4.1% a year since its inception in 2009 to the end of June.
FNB Islamic banking customers benefit from FNB’s digital innovation and its popular eBucks rewards programme, says Shaheen Suliman, COO at FNB Islamic Banking.
The bank offers a full service from transacting, investing, lending to insurance, he adds.