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Investing the Shariah way with Sanlam Private Wealth

12 November 2015 Suleman Khan, Sanlam Private Wealth
Suleman Khan, Shariah Portfolio manager at Sanlam Private Wealth.

Suleman Khan, Shariah Portfolio manager at Sanlam Private Wealth.

Muslims account for 11% of high net worth individuals in South Africa, and are the fastest growing millionaire group in the country, according to the South Africa 2015 Wealth Report. The report, by market research firm New World Wealth, states that the number of Muslim high net worth individuals – people with net assets of US$1 million or more – grew by 190% over the past eight years.

Many Muslim investors have very specific requirements when it comes to the investment process and compliance, however seek to invest in a diversified portfolio of equities which offers uncompromised returns while still complying with Shariah law. The Shariah portfolio from Sanlam Private Wealth offers just this – above-average Shariah-compliant returns over an investment horizon of three years or more.

Portfolio manager Suleman Khan says, “Our portfolio is designed to meet the needs of long-term Muslim investors looking for concentrated equity exposure through a diversified portfolio comprising only equities and a limited core of acceptable financial instruments. These include common stocks, exchange-traded funds (ETFs), compliant real estate investment trusts (REITS) and cash.”

Investments that are avoided include preferred and convertible stocks, individual and index options, futures and swaps, money market funds, bank certificates of deposit, bonds and all conventional fixed income instruments. No interest is earned on cash balances. Any interest and impermissible income is purified during the audit process and donated to charity.

The benefits of the Shariah investment process

“Before an investment can be included in our Shariah portfolio, we go through a comprehensive screening process. This process ensures that you can have peace of mind about your investments, without having to spend the time and effort to select and manage appropriate investments yourself. In addition, even when an investment successfully complies with all steps, we provide auditing and income purification on a regular basis,” says Khan.

The following principles are followed:

• The products of companies included in the portfolio comply with Shariah standards, following a thorough screening process
• Ratios, such as debt to equity, are kept within acceptable limits
• No interest (Riba) is earned
• The portfolio only includes the correct financial instruments – largely equities
• The multi-asset portfolio means the overall risk level is lower, as investments are diversified.

Performance and asset breakdown

The performance of the SPW Shariah portfolio over one, two and three years (annualised to 31 August 2015) is as follows:

The approximate asset breakdown of the Shariah portfolio is as follows:

A Shariah Board supervises the SPW Shariah portfolio

The Shariah portfolio of Sanlam Private Wealth is supervised by the Independent Shariah Supervisory Board, which comprises senior Ulama and is chaired by Mufti Ahmed Suliman. Mufti Suliman is a former member of the Fatwa Department and Judicial Committee of the Jamiatul Ulama in KwaZulu-Natal, and now also a member of the Markaz Alnoor lil Iftaa wal Irshaad (Centre for Islamic Verdicts and Guidance) in Pretoria. Mufti Zubair Bayat (Durban) and Sheikh Tauha Karaan (Cape Town) make up the remaining board members.

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