A Spirited Affair
Mayban Dana Yakin Growth Fund
Focus (for Islamic funds) has shifted to (among other assets) plantations with its recent growth and success,” Venardos of Heritage Fiduciary Services comments.
The current annual income yield target for Dana Yakin stands at roughly 7% - 8%. According to Lipper, Dana Yakin returns rank the fund 25th out of 36 on Lipper’s list of Malaysian Islamic funds
Given the framework in which Islamic Funds must operate in, these funds underperform their peers. Just one comparison – the Dow Jones Islamic Market index had a 14.5% yield for 2006 whereas the MSCI Emerging Markets index gained 29% in the same timeframe. The trading and administrative costs for such funds are also higher than larger conventional funds.
But there are upsides that may appeal to the niche investor or those who desire ethical investment. Bernardo Vizcaino, head of research and specialized funds at Eurekahedge notes that, “The screening criteria and prohibitions stipulated in Sharia law encourage sensible and safe investments, and idealistically seek to promote transparency and minimize ambiguous dealings. Indeed our initial analysis of these products has shown that these funds tend to protect capital in bear markets while performing as well as the overall market in bullish environments.”
Heritage Fiduciary’s Venardos adds that, “the Dow Jones Islamic Funds Index mirrors the Dow Jones Social Responsibility Index, both of which were very much in line during the 1997 correction.” Islamic funds he thinks have come to represent a safe haven for those pulling money out from volatility, especially in Asia.
But reality bites. “The best assets are still 'sex, drugs and rock ‘n’ roll', which they (investors) certainly miss out on," says Venardos.
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