The Old Mutual Shari’ah funds – aligning investments with purpose

Shari’ah funds for shared values

The General Council for Islamic Banks and Financial Institutions stated that the global Islamic funds market has grown by more than 300% over the last decade to nearly $300bn. Fitch Ratings estimates that the growth rate of Islamic funds has exceeded that of the broader global mutual fund industry!

With almost 30% of the Old Mutual Shari’ah funds held by non-Muslim investors, the popularity of Shari’ah investments in the general populace is nothing new for Old Mutual. When taken in the context that those who disclose to practice Islam amount to about 3% of the South African population, we can conclude that Shari’ah appeals to a broader investment universe than just Muslims. For an inclusive and circular country like South Africa, this might be easy to justify; however, it is a worldwide trend.

Old Mutual a pioneer of Shari’ah

Old Mutual launched the first Shari’ah fund in South Africa in 1990 and now manages over R8.6bn ($500m) in local and global assets.

Aligning with UNSDG’s for sustainable outcomes

Shari’ah principles have historically been interpreted by scholars to determine what the minimum standards are to meet the requirements of Islamic law. The Old Mutual investment approach incorporates ESG principles and United Nations Sustainable Development Gaols (UNSDGs), sharing common values with the higher objectives of Islamic Law – which, among others, seeks the preservation and protection of life, resources, and the environment.

These funds exclude companies whose core business involves dealing in alcohol, gambling, non-Halal foodstuffs or interest-bearing instruments. Like all Old Mutual Funds, all funds in our Shari’ah range have publicly disclosed ESG ratings. For the recently launched Global Islamic Equity Fund these will be available for the first time with the December 2023 ratings.

According to Islamic law, any income or wealth that accrues to the fund in a Shari’ah non-compliant manner, such as interest income and penalties for delayed payment of debt obligations, is non-permissible. The wealth or non-permissible income created from this investment approach is then shared with disadvantaged communities in support of UNSDGs.

The EY wealth and asset managers survey reports a growth of over 107.4% annually since 2012 in sustainable investing. Currently, they account for 18% of the assets under management (AUM) in the global wealth and asset management industry.

Shari’ah – Action for Sustainable Development

The Old Mutual Shari’ah board has donated almost R100m of non-permissible income to healthcare, education, and maternity care projects since the start of its partnership with the South African Muslim Charitable Trust (SAMCT). The donations are not only to Muslim communities, but benefit South Africans of different faiths and social backgrounds across the country.

The latest donation was to thousands of learners and teachers at 14 project high schools in four districts across the Western Cape who will benefit from a science initiative. This is a cost-effective solution to address the limited access to scientific educational resources in rural and peri-urban public schools with inadequate or no science laboratories.

These funds’ social impact, which is significant in communities, is a dimension that is not captured in the pure return on investment but contributes greatly to sustainability and cohesion. This is an achievement, one would argue, that directly contributes to “a world in which everyone enjoys decent work, inclusive and sustainable economic growth” as stated in the United Nations according to the United Nations Environment, Religion and Culture in the Context of the 2030 Agenda for Sustainable Development.

Our range of Shari’ah Funds

For more information on the Old Mutual Shari’ah range, please visit: www.oldmutualinvest.com/our-solutions/shari’ah