Ramazan Mubarak! Shariah Equity Strategy to be launched

Ramazan Mubarak to everyone!

On this auspicious occasion, we at OmniScience Capital, first of all, wish everyone Ramazan Mubarak.

We are pleased to announce that we will be launching a Shariah-Compliant Equity Portfolio Strategy for our Clients and Partners on the occasion of Eid ul-Fitr around 1 month from now, target date 15th June 2018. There is no better Eidi in the form of a sound investment vehicle to give to your children, and to your future self.

We being an equity market specialist and working with a large partner network, get a lot of feedback from clients and advisors or distribution partners about what would work for their clients. Based on this feedback we realized that there is a gap in the Indian equity investment management as far as the needs of the Islamic investment community is concerned.

Shariah, primarily, prevents the earning of interest, and hence, the regular savings bank and fixed deposits which are the staple for most Indians are not preferred as an investment avenue. Many are left with rent-yielding real estate as the only possible investment avenue. However, the yields in this asset class are quite low. Given this background, there is a strong need for a Shariah-compliant equity exposure which could potentially provide higher returns and help diversify the client portfolios.

However, the equity markets have a lot of companies in sectors which are not Shariah-compliant. Further, even in the sectors which are Shariah-compliant, the companies might not be, if they are financially structured with debt, and have significant interest-related earnings or expenses. Hence, there is a need for a Shariah-compliant investment strategy. Spear headed by Hakim Taj, from the investment solutions team; and Ashwini Shami, from the Scientific Alpha team; we have worked to customize the India Total-cap universe to create a Shariah-compliant universe. Creating a Shariah-compliant universe required extensive research in the form of understanding the logic and philosophy; researching Global Shariah investment standards; conversing with learned individuals in the field; and analyzing historical and current developments.

Typically, a Shariah-compliant universe results in 50% or fewer sectors qualifying. Clients who want to follow their belief system are not necessarily focused on whether this universe will provide them a market-beating result; they can accept lower-than-market returns.

To understand the possible return profile of the Shariah-compliant universe vis-à-vis the conventional Total-cap universe, as well as, the Scientific Alpha strategy applied to this universe, we carried out an extensive research study. What we found out was unexpected, though not necessarily surprising given the emphasis of Scientific Alpha, too, on zero or low-leverage companies. We will be circulating this research report privately in the next few weeks to people who have requested us earlier.

Again, Happy Ramazan!