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September 08, 2000
Islamic Index Fund Puts Faith in Finances
A new faith-based socially responsible mutual fund adds additional "sin" screens to the list.
SocialFunds.com --
Socially responsible investors may find common ground in some faith-inspired mutual funds,
especially those that employ social screens, invest in community development, or are active in
progressive shareholder advocacy. A new socially screened index fund, the Dow Jones Islamic Index
Fund (IMANX, from the Arabic for "Faith"), puts companies to the test based on the principles of
Islamic law.
 Launched on June 30, 2000, The Dow Jones Islamic Index
Fund is the first to track the Dow Jones Islamic Market USA Index, created by Dow Jones Indexes for
investors who wish adhere to Islamic investment guidelines. The Index Fund, with $22 million in
assets so far, is managed by Allied Asset Advisors Funds, an investment advisor based in Burr
Ridge, Illinois.
"Islamic investing is now much easier," said Omar Haydar of Allied Asset
Advisors, a new subsidiary of the North American Islamic Trust, which has been an endowment manager
for over 20 years with more than $35 million in assets. "Previously, individual investors had to
personally analyze equities for compliance with their religious principles. Now the work is done
for them."
The Dow Jones Islamic Market USA Index is a benchmark for U.S. stocks that are
compliant with Islamic law, called Shari`ah, which precludes alcohol, tobacco, pornography,
gambling, and defense. In addition to these familiar screens Shari`ah also excludes other forms of
entertainment, such as hotels, music, and cinema, as well as pork-related products.
But
the most distinctive principle of Shari`ah is that it is unlawful to charge fee on a debt, namely
interest, precluding many banks and financial institutions as "impure." In fact, any company that
derives more than 5 percent of its income from interest, or any which has substantial debt, is
excluded from the Islamic Index.
Dow Jones retains an internationally representative and
reputable Shari`ah Supervisory Board to set the criteria for and review the components of the
Index. Securities are selected for the Islamic Index from the 2,700 stocks in the Dow Jones Global
Index family, representing the most liquid U.S. stocks meeting the Shari`ah investment guidelines.
"Adhering to Islamic principles does not hinder returns," added Haydar. In support of this
assertion, the Index has performed well over the past four years since its inception, with a 27.25
percent average annual return. This is as compared to an average annual return of 24.22 percent for
the S&P 500 and 12.40 percent for the Russell 2000 over the same period.
"We believe that
a Securities Exchange Commission (SEC) registered fund tracking the Islamic Market USA Index is a
long overdue investment vehicle", said Rushdi Siddiqui, Director of the Dow Jones Islamic Index
Group and Business Development for the Dow Jones Indexes Group. "The Index currently consists of
233 companies, with an average market capitalization of $27.7 billion and a median capitalization
of $5.7 billion."
The Islamic Index Fund is offered in two classes, no load and a level
load that pays brokers a total of 1 percent per year, providing flexibility for investors. In
addition to the screens for debt and interest, investors are encouraged to devote a "purification
factor" of 3-9 percent of their returns to philanthropy to account for any unlawful or impure
practices that were not screened.
The Dow Jones Islamic Index Fund is not the only choice
for Islamic investors, joining the ranks of products like the Amana Funds, representing more than
$50 million assets managed by Bellingham, Washington-based Saturna Capital Corporation. But the new
fund represents the first foray for Islamic personal investors into the field of unmanaged index
funds, and a significant contribution to the offerings of socially responsible investments.
©
SRI World Group, Inc. All Rights Reserved.
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