Islamic Principles Help Mutual Fund Flourish


The little-known mutual fund Amana Income Fund is one of this year's top performers. It can thank Islamic law for that.

The Amana fund is a specialized fund that invests based on Islamic religious principles. That means it must avoid, among other things, investing in banks or other firms that earn money by charging interest. Nor can it invest in companies carrying lots of debt.

This year these restrictions are paying off. The fund, which seeks well-established companies paying dividends, has largely avoided the mortgage-related carnage hitting the markets since the summer. The Amana Income Fund has returned 13% since the start of this year, and is ranked in the top 2% of its category. With shares of many banks and brokerage houses having plunged amid concerns over losses on mortgage-related securities, the average stock income fund is up only 3.6%, according to fund tracker Lipper Inc.

"It's good that you don't have [banks and financial companies] in periods like this year," says Nicholas Kaiser of Saturna Capital Corp., Bellingham, Wash., which manages the Amana funds. "It's great to be out of it."

Indeed, most mutual funds that invest based on Islamic principles have largely weathered the recent credit turmoil. Two Islamic funds offered by Azzad Asset Management, smaller than the Amana and its $333.1 million of assets, also are beating the Standard & Poor's 500-stock index since the start of this year, after trailing the broad market for several years.

Dow Jones Islamic Fund is up 13.3% year to date, which ranks it in the top 4% of its category of large- market-capitalization stocks. The fund, managed by Allied Asset Advisors, tracks the Dow Jones Islamic Market Index, which is a product of Dow Jones & Co., publisher of The Wall Street Journal. (MORE)

 


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