I am retired and take educated guesses on all things financial.

June 28, 2009

June 28, 2009: Shariah-Compliant Investing Exploding, In More Ways Than One

Some estimates put the amount of world wealth invested in Shariah-compliant investments at over $2.7 trillion. If the trend continues, such investments may well grow to several times that amount within a few years.

Shariah-compliant investments are those entities that adhere to Islamic Law. Funds boasting the Shariah-compliant claim most often have Muslim clerics(Shariah adviser) as compensated consultants.

Shariah law authorities are paid directly or indirectly as investment blessors by such entities as Dow Jones,Standard and Poors, HSBC, Citibank,Deutsche Bank, Goldman Sachs,UBS, etc. to determine and assure the compliance of these and other linked institutions' products with Shariah.

There appear to be six key drivers of the Shariah compliance finance market:

Specialized law firms such as King and Spaulding, Patton Boggs and Gerystyn Savage; Shariah consulting firms such as Shariah Capital, Shariah Index Providers such as HSBC, Standard and Poors, Dow Jones and FTSE; Accounting firms; Software providers; Global banking institutions.

While many investors choosing Shariah-compliant products as a way to invest in a religious and socially preferred fashion, institutional compliance with Shariah law is a slippery slope. Investor's Business Daily reported that "Wall Street is jumping into this oblivious to the risks not just to the bottom line, but to national security. It knows little about Shariah law and is turning to consultants to create 'ethical' products to sell." One such consultant was the North American Islamic Trust (NAIT). Several months ago, Dow-Jones had to sever its relationship with NAIT after federal agents disclosed that NAIT was a Saudi-tied front for the pro-jihad Muslim Brotherhood that leads some of the most radical mosques in America. The Justice Department in 2008 named NAIT an unindicted co-conspirator in a terror money-laundering scheme to funnel money to Hamas under the banner of charity. Similar situations are not rare.

While not investing in pork product companies, alcohol, tobacco, gambling and entertainment are laudable if that is your view, the Shariah investor is tacitly supporting other aspects of Shariah law.

For instance, Shariah law in regards to women:

Muslim women are prohibited from marrying without parental consent, their wedding can be held without their being present or even in agreement to wed as long as the guardian consents - allowing underage and/or arranged marriages to occur, may only marry men of the Muslim faith, can be divorced simply by her husband repudiating her without obligation to provide child support,cannot divorce her husband without his consent,cannot claim abuse as grounds for divorce,can only inherit 50% of what a brother inherits, and if divorced cannot remarry at the risk of losing custody of her children. I'll leave stoning and other dark age punishments as penalties against women out of the mix.

Devout Muslims living in non-Muslim nations are allowed to use regular financial institutions due to a lack of Shariah-compliant alternatives under the Shariah doctrine of extreme necessity. However, once Shariah banks, for instance, exist in your locale, one is religiously obligated to utilize them exclusively.

Shariah Sovereign Wealth Funds are now pumping hundreds of billions of dollars into the world investor community. One is entitled to speculate that it is only a matter of time until the Islamic advisers controlling these monies use them to destabilize Isreal and other Western democracies or impose distasteful stipulations upon companies in which they acquire a controlling interest.

True, faith-based investing is not limited to Muslims. Catholic, other Christian and, if one wants to be frank, the religion of Environmentalism maintain their own views and investing standards.Investors utilizing a belief system to chose an ETF, Fund or other investment has generally resulted in gains close to that of the S&P 500 since 2000.

If you wish to explore Sharia-compliant Funds, ETFs and the like, you have a world-wide space to investigate. Perhaps you may want to travel to the UK where iShares has the MSCI World Islamic/Sharia ETF (ISWD) and the Emerging Markets Islamic/Sharia ETF (ISEM) and several instruments sponsored by Deutsche Bank. Canada maintains several Funds through Alt Management, Ltd. such as the FrontierAlt Canada, World and Global Income Funds. In the U.S., Sharia-compliant Funds can be via the Halla Mutual Funds run by Azzad ( of Falls Church, Va., the U.S Saturna Amana Funds (including the Amana Trust Growth Fund - AMAGX),amongst others.

ETFs and Funds that cater to Muslim beliefs are still a small part of the investing world, but the potential growth can be nothing short of spectacular. One hopes that these investments have profit and not geo-political interests as the centerpiece of their existence.

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