At present, only Tata MF and Taurus MF offer Shariah compliant funds.
In India, the concept of has not taken off in a
big way. In India, there are only two fund houses which had launched ethical
on the fundamentals of Islamic investment philosophy known as ‘Shariah’.
funds don’t invest in the companies which are engaged in liquor, gambling,
tobacco, entertainment, securities trading, banking and finance as earning interest is sin in Islamic law. Another
criterion is these funds only invest in a company where debt should not exceed
33 percent of the average market capitalization over a 12 month periods.
Industry experts say that the major challenge in
ethical funds is product awareness and its marginal market demand. These funds
only cater to a particular section of society. Some experts also believe that
the returns in Shariah funds are not very astonishing as compared to equity
Experts believe that creating awareness about
these funds will help attract investors. Not only Muslims but also Hindu, Jain
and other community might show interest after knowing the significance of these
products, they added.
At present, Tata MF and Taurus MF offer funds
which comply with Shariah norms.
Ethical Fund: This open ended
equity oriented fund launched in 2009 aims to provide capital appreciation and
income distribution by investing in a diversified portfolio of equities of Shariah compliant companies. The benchmark of
the scheme is CNX 500 Shariah. Value Research data shows that the scheme has
generated annualized returns of 20.97 percent since inception. The scheme
manages Rs 23.02 crore as on March 2013. Ramesh Kabra, Head of Products,
Development and Marketing at Taurus Mutual Fund said a lot of awareness needs
to be created about the significance of ethical funds. He pointed out that
Taurus Ethical Fund has also found takers among the Hindu community. “50
percent of AUM under Taurus Ethical Fund comes from non-Muslim communities like
Hindu and Jains. The ethical fund provides good returns in long term horizon.
Its demand in middle east countries is very impressive.”
Ethical Fund Plan A-G: It is open
ended equity fund launched in April 2001 which predominantly invests in a portfolio
of equity and equity related instruments based on principles of Shariah. It
aims to provide medium to long term capital gains. The scheme has given an
annualized return of 21.36 percent and manages Rs 104.89 crores. The benchmark
of the fund is CNX 500 Shariah.
Siddique, a Chennai based Financial Adviser praises the concept of ethical
funds but finds that there is mixed response in the market for these funds.
“Initially people were reluctant to invest in these funds but from last few
months some people have come to me for ethical funds”, said Siddique.