**KembaraXtra–Islamic Finance–Islamic Capital Market-

Performance of Islamic Indices and Conclusion on Islamic Mutual Funds


Performance of Islamic vs Conventional Indices (Simple Explanation)
• Over the full study period, Islamic indices generally performed better than conventional indices, with emerging markets being the main exception
• During the financial crisis (2007–2010):
– Islamic indices did not consistently show lower risk (measured by standard deviation and coefficient of variation)
– The only clear cases where Islamic indices showed relatively lower risk were Europe, and in some measures S&P 500 and S&P Europe
• After the crisis, especially during 2011–2016:
– Islamic indices showed lower volatility (standard deviation)
– Islamic indices showed a lower coefficient of variation, meaning better returns for each unit of risk taken
• This indicates that Islamic indices recovered faster and more steadily than conventional indices after the global financial crisis
• When returns are adjusted for risk, Islamic equity and fund indices are superior to conventional market indices


Conclusion on Islamic Mutual Funds
• Islamic mutual funds can invest only in assets and securities that fully comply with Shari’ah principles
• Ethical conduct is the core foundation of Islamic mutual funds and must not be compromised
• Sales and marketing practices must be transparent, honest, and responsible
• Misleading claims, emotional manipulation, or exaggerated return expectations are strictly unacceptable
• Full disclosure is required, especially regarding:
– Risks
– Fee structures
– Long-term nature of investments
• Investor education is critical to help investors understand:
– That Islamic mutual funds are long-term investments
– That returns are not guaranteed
– That risks exist, even in Shari’ah-compliant products
• Strengthening ethical distribution practices and investor awareness will help Islamic mutual funds grow sustainably and credibly


One-line Summary
👉 Islamic indices show strong post-crisis resilience and better risk-adjusted performance, while Islamic mutual funds must uphold strict ethical standards, transparency, and investor education to maintain trust and long-term growth.