Investing In Islamic Funds: A Practitioner's Perspective

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• Similar to conventional fixed income, Sukuk investing will still be assessed by international rating agencies for investors to refer to in assessing its risk/return parameters.
• The Dow Jones Sukuk Index (DJSI) produced superior returns over the conventional index over 2 years as of September 2012, improving over the unimpressive performance of its 5 and 7-year returns.
• The returns volatility of the DJSI correspondingly fell significantly over this same two-year period as the number of constituents in the index tripled, meaning that a severe fluctuation of any one constituent had a less singular effect on the overall index.
• Unlike Shariah-compliant equity investing, which is a subset of global equity, Sukuk investing is unique in that it enlarges the existing conventional fixed-income investment universe to grant conservative investors attractive opportunities in a completely separate class of fixed-income assets.
• More than 60 percent of the investment universe of DJSI is composed of investment-grade Sukuks from countries that may not register significantly, if at all, inside the conventional index. This separate class of fixed-income assets offers high-quality diversification for fixed-income investors.
• Sukuks issued by financial institutions constitute the second-largest sector in the DJSI (about 30%). This enables conventional fixed-income investors to diversify the quality of their overall portfolio’s exposure to the financial sector as they can gain exposure ...