Syariah unit trusts offer good returns too, says CEO


  • Business
  • Wednesday, 28 May 2003

BY DALJIT DHESI

SYARIAH funds should not be sidelined and perceived by investors as generating lower returns than conventional unit trust funds which are mainly equity-based, according to Pacific Mutual Fund Bhd chief executive officer Michael Auyeung. 

Many investors, he said, held the view that syariah funds did not have the ability to outperform the market. 

This is because the funds did not invest in attractive and high yielding stocks such as gaming, banking, tobacco, alcohol and other non-halal stocks. 

Auyeung said this perception had led investors to mistakenly conclude that without these “attractive and outperforming stocks” in the investment portfolio, syariah funds were inferior to conventional funds in terms of potential and actual returns. 

Syariah-compliant unit trust funds invest in instruments that are defined as syariah-compliant by the Securities Commission. 

There were 704 syariah securities (as approved by the Syariah Advisory Council of the Securities Commission) as at April 25, higher than 652 registered a year earlier. 

As at end-April, there were 41 private syariah unit trust funds (all categories) compared with 23 a year earlier. 

Auyeung said if one were to compare the performance between the Kuala Lumpur Syariah Index (KLSI) and the KLSE Composite Index (CI), the difference was negligible despite the fact the KLSI did not have any of these 'more attractive non-halal' stocks. 

“The lack of differentiation in performance is consistent for both short and medium-term periods. 

“This is because although investors perceive the banking and gaming sectors to be highly responsive to economic upturns, the KLSI has sufficient counters whose share prices show equal sensitivity to economic improvements, for instance, the construction sector,'' he said in an interview. 

Another misconception about syariah funds that should be dispelled is that they are only for Muslim investors. 

Although the fund adheres to syariah principles, it does not preclude investment by non-Muslims as long as the fund's risk-return mandate and management style fit the investors' financial planning requirements. 

The fault, Auyeung said, partly lie on unit trust management companies. 

He said these companies focused intensively on the “Islamic-ness” of these funds and placed secondary emphasis on their role as sound, competitive investment vehicles. 

Investors, particularly Muslims, should also realise that many government funds, including the Employees' Provident Fund (EPF), are non-syariah compliant. 

The EPF's investments include shares in companies involved in various non-Islamic sectors such as conventional banking and insurance. 

Therefore, Muslim investors should give some consideration to investing in private syariah unit trusts. 

Meanwhile, the non-Muslim investors should consider syariah unit trusts as they would not suffer when government entities, in their fund-restructuring efforts, sold down on their non-syariah stocks.  

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