World-class sharia-compliant portfolio investing

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John A. Sandwick
Manager,
Safa Investment Services - Islamic Wealth & Asset
Management S.A.
1
Sharia-compliant global asset allocation
Riyadh, Saudi Arabia
In technical cooperation with
Islamic Wealth & Asset Management S.A.
Geneva, Switzerland
April 2013
About Safa Investment Services
•
The Investor for Securities Co. (“The Investor”), founded 2007, licensed by Saudi Capital Market Authority
•
SAR 7 billion AUM (about CHF 1.8 billion), mostly local real estate funds
•
Over 800 domestic Saudi clients
•
Leading Saudi investment company, over 40 staff, Riyadh based
•
Just bought position in Islamic Wealth & Asset Management S.A.
•
IWAMSA owns the Safa brand, franchised to The Investor
•
The Investor expanding into liquid asset management, Safa Investment Services
•
Target market is awqaf (Islamic endowments), takaful (Islamic insurance), private clients
•
Large potential market
•
Entirely sharia compliant, bottom-up fatwa
3
Islamic asset management
•
Same professional rules as conventional
asset management industry
•
Strict filtering, sorting and qualification
of all assets
•
Only “best of class” assets allowed
•
Asset allocations fully optimized using
advanced asset allocation software
•
Superior results from professional asset
management
4
The Islamic investment universe
There are more than 800 sharia-compliant
funds and ETFs in the world today with
over $100 billion Assets Under
Management (AUM).
Qualifying Islamic sub-universe has over
$50 billion Assets Under Management.
SHARIA-COMPLIANT FUND BUY LIST
Must filter & sort these >800 funds and
ETFs, then means-variance test to create a
proprietary Buy List:
•
•
•
•
•
•
•
More than $50 million AUM
More than 2-year track record
Less than 30-day liquidity
Acceptable legal jurisdiction
Transparent, timely reporting
Direct access to managers
Fatwa from one or more of the major
sharia scholars
Asset Class
Count
AUM
Money Market
17
$4.7 billion
Sukuk
60
$2.4 billion
Trade Finance
15
$9.6 billion
209
$14.3 billion
12
$18.2 billion
9
$2.5 billion
59
$1.3 billion
381
$53.1 billion
Equities
Precious Metals
Real Estate
Special Strategy
Total
Construct portfolio allocations among the
“best of class” funds on a proprietary Buy List.
5
Asset allocation, hypothetical Balanced strategy
ASSET CLASS
% OF TOTAL
15%
Murabaha & trade finance
Sukuk & trade finance
Global equities
Alternative Investments
1.
2.
3.
4.
5%
Murabaha & Trade
Finance Funds
5%
Fixed Income (sukuk &
trade finance) Funds
45%
35%
45%
Equity Funds
35%
15%
Alternative Investment
Funds
Above is identical to conventional, but entirely sharia-compliant Balanced allocation
Muslims require performance equal or superior to conventional allocations, but with full respect for sharia
All investible assets must be from professional Buy List
Allocations must meet global professional asset management standards, but also strict sharia standards
6
Historic performance
Performance measured 1/1/08 to 31/1/13
Portfolio Performance
vs. 50% ML Bonds/50% MSCI Equities
Annualized Return
Cumulative Return
Annualized Excess Return
Cumulative Excess Return
Balanced Islamic Portfolio USD
4.39%
24.42%
0.81%
4.82%
Julius Baer Strategy Balanced USD B
0.63%
3.22%
-2.96%
-16.37%
BlackRock Global Allocation A2 USD
0.86%
4.43%
-2.73%
-15.17%
Credit Suisse Portfolio Fund Balanced USD B
0.49%
2.54%
-3.09%
-17.06%
USD global balanced investing comparables
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Risk & return
Standard Deviation
Sharpe Ratio
Balanced Islamic Portfolio USD
7.03%
0.56
Julius Baer Strategy Balanced USD B
9.18%
0.02
BlackRock Global Allocation A2 USD
11.84%
0.04
Credit Suisse Portfolio Fund Balanced USD B
11.49%
0.00
50% Merrill Lynch Global Bonds/50% MSCI Global Equities
12.18%
0.26
Risk & return variables measured 1/1/08 to 31/1/13
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Drawdown
Drawdown measured 1/1/08 to 31/1/13
Max. Drawdown
Max. Drawdown Begin
Date
Max Drawdown
Recovery Length
Pain Index
Gain-to-Loss Ratio
Balanced Islamic Portfolio USD
-16.29%
May-08
16
3.56%
0.99
Julius Baer Strategy Balanced USD B
-26.19%
Jan-08
26
7.62%
0.87
BlackRock Global Allocation A2 USD
-27.10%
Jun-08
23
8.46%
0.77
Credit Suisse Portfolio Fund Balanced USD B
-28.27%
Jun-08
24
8.84%
0.91
50% Merrill Lynch Global Bonds/50% MSCI Global Equities
-29.04%
Jun-08
19
5.90%
0.91
9
Return distribution
Omega
MAR = 0%
Upside Omega
MAR = 0%
Downside Omega
MAR = 0%
Zephyr-K Ratio
Balanced Islamic Portfolio USD
1.63
0.98%
0.60%
13.4
Julius Baer Strategy Balanced USD B
1.09
1.02%
0.93%
5.30
BlackRock Global Allocation A2 USD
1.1
1.39%
1.26%
5.08
Credit Suisse Portfolio Fund Balanced USD B
1.08
1.33%
1.23%
4.27
50% Merrill Lynch Global Bonds/50% MSCI Global Equities
1.31
1.52%
1.16%
8.59
Measured 1/1/08 to 31/1/13
10
Omega
11
Balanced Islamic Portfolio USD
Periodic returns
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total
2013
0.87%
-
-
-
-
-
-
-
-
-
-
-
0.87%
2012
4.07%
1.67%
0.34% -0.55%
-3.10%
0.84%
0.61%
1.38%
1.47%
-0.84%
-0.21%
0.65%
6.34%
2011
0.01%
0.19%
2.18%
2.33%
-0.64%
-0.32%
0.36%
-1.66%
-3.56%
3.09%
-1.34%
0.91%
1.36%
2010
0.33%
1.17%
3.17%
1.22%
-3.52%
1.58%
0.71%
1.42%
3.03%
0.90%
-0.18%
3.39%
13.84%
2009
-1.12%
-1.21% 1.54%
2.71%
3.33%
0.67%
0.88%
0.70%
2.05%
1.84%
1.52%
-0.32%
13.24%
2008
-0.02%
1.91% -0.87% 2.27%
-0.83%
-0.80%
-0.68%
-3.24%
-4.40%
-6.71%
-0.71%
2.65%
-11.23%
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Contacts
For more information, Saudi Arabia:
For more information, Switzerland:
Safa Investment Services
The Investor for Securities
Aljomaiah Towers, King Fahd Road
P.O. Box 67838
Riyadh 11517, Saudi Arabia
Telephone: +966 (1) 200-7002 x 182
e-mail: [email protected]
www.theinvestor.com.sa
Safa Investment Services
Islamic Wealth & Asset Management S.A.
1204 Geneva
Switzerland
Telephone: +41 (79) 642-2304
e-mail: [email protected]
www.safainvest.com
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