Islamic Funds, more widely referred to as Shari’ah Funds in South Africa, are classified ethical funds as they invest in line with a chosen values and belief system, in this case Shari’ah Law. People of diverse backgrounds can often share the same values. At Old Mutual, over 30% of clients invested in Shari’ah funds are not of Islamic faith, and although globally this number drops to 21%, this still proves that more and more people invest in line with their values and beliefs.  

Shari’ah promotes inclusive growth

Ethical investments are less risky because companies who strive to protect the environment, promote social cohesion, and practise good governance (ESG) are often better equipped to handle both micro- and macro-environmental challenges. Having strong ESG practices can limit these companies’ damage from reputational risks and legal liabilities in general. They also lead the way in innovation by developing new products and services that open new markets and growth opportunities.

Shari’ah investing is relevant to South Africa because our  objective is to achieve inclusive economic growth. The intrinsic value of Shari’ah promotes a balanced distribution of wealth and doing good, these are necessary to achieve inclusive growth. 

Pioneering innovation

In 1992  Old Mutual Unit Trusts pioneered Shari’ah investing in South Africa, launching our first Shari’ah fund, the Old Mutual Albaraka Equity Fund. We partner with the Albaraka bank, who are pioneers in Islamic Banking. This combination results in a very human approach that is moral, sustainable, socially conscious and aligned to the United Nations Sustainable Development Goals (UNSDGs).

We have continued to innovate and launched the first Sukuk of its kind in South Africa, which incorporates ESG. Old Mutual’s range of Shari’ah unit trusts comprises four funds, including the Old Mutual Albaraka Income Fund (Regulation 28 compliant), Old Mutual Albaraka Balanced Fund (Regulation 28 compliant), Old Mutual Albaraka Equity Fund, and the Old Mutual Global Islamic Equity Feeder Fund. 

Non-permissible income (income from non-halaal assets)

Our partner in impacting the UNSGs is The South African Muslim Charitable Trust (SAMCT), which was established in 2008 to act as a channel for the provision of funding assets, services, and other resources to approved public benefit organisations. Since its creation, the Trust has made significant donations towards poverty alleviation, empowerment, community upliftment and sustainability programmes. Funds are distributed to improve the health and development of people, irrespective of race or religion. The Trust contributes towards four primary sectors – Education, Health, Social Development and Poverty Alleviation.

Permissible income (income from halaal assets)

This year marked the inception of a collaborative partnership between Old Mutual Wealth and the Gift of the Givers Foundation, the global disaster relief and social development organisation. Our Old Mutual Albaraka Income fund was selected as the underlying investment for the Old Mutual Gift of the Givers Life Fund. The Old Mutual Gift of the Givers Life Fund is an endowment portfolio, fully invested in the Old Mutual Albaraka Income Fund. 

All income from the Old Mutual Gift of the Givers Fund is donated to the Gift of the Givers Foundation. These specific funds will be dedicated to supporting disaster relief and humanitarian efforts in South Africa. Investors can therefore take pride in knowing that their investments support the Gift of the Givers’ life-changing efforts across the country. Additionally, since the income of the endowment fund is donated, a tax advantage accrues to the fund. Old Mutual, on behalf of investors, claims this tax benefit and reinvests it into the fund to ensure capital appreciation.

Aiming for the higher purpose

Shari’ah investing principles have historically been interpreted by scholars to determine what the minimum standards are that an investment must satisfy to meet the requirements of Islamic Law. Our investment approach incorporates the higher purposes and objectives of Islamic Law by actively incorporating ESG principles and UNSDGs, sharing common values with the higher objectives of Islamic Law – which, amongst others, seeks the preservation and protection of life, resources, and the environment. We go beyond the literal meaning of the law, raising the bar to incorporate the purposes and objectives behind Shari’ah, integrating both Shari’ah standards and ESG principles into our investment process. The wealth created from this investment approach is also shared with disadvantaged communities in support of UNSDGs.

*Sources: General Council for Islamic Banks and Financial Institutions, Global Islamic Liquidity Report 2023, Forbes, Aljazeera, World Bank

By: Gontse Tsatsi, Head of Retail Clients at Old Mutual Investment Group