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KembaraXtra–Islamic Finance–Islamic Capital Market – Types of Shari’ah-Compliant Investment Funds (Note Forms)
Islamic Mutual Fund
-Pooled investment fund managed professionally under Shari’ah supervision
-Invests in Shari’ah-compliant equities,Sukuk,and approved money market instruments
-Investors receive fund units and returns based on Net Asset Value (NAV)
-Returns come from capital gains and halal dividends
-Risk level is moderate and depends on underlying assets
-Liquidity is moderate as units are redeemed at NAV (usually daily)
Islamic Exchange-Traded Fund (ETF)
-Fund that tracks a Shari’ah-compliant index
-Units are traded on a stock exchange like shares
-Investments are limited to Shari’ah-approved index constituents
-Returns mirror the performance of the tracked index
-Highly liquid since units can be bought and sold intraday
-Risk is market-linked
Islamic Sukuk Fund
-Invests primarily in Shari’ah-compliant Sukuk
-Income is generated from lease rentals or profit-sharing structures
-Lower risk compared to equity-based funds
-Suitable for income-seeking investors
-Liquidity is moderate depending on Sukuk market depth
Islamic REIT (Real Estate Investment Trust)
-Invests in Shari’ah-compliant real estate assets
-Income generated mainly through rental payments
-Properties must be halal in use and financing
-Risk is moderate and linked to real estate market conditions
-Liquidity is higher if REIT is listed on an exchange
Islamic Money Market Fund
-Invests in short-term Shari’ah-compliant instruments such as Murabahah and Wakalah
-Focuses on capital preservation and liquidity rather than high returns
-Very low risk compared to other Islamic funds
-Highly liquid and suitable for short-term cash management
Mixed Islamic Fund
-Invests in a combination of equities,Sukuk,leasing,and commodities
-Tradable only if tangible assets make up at least 51% of the portfolio
-Offers diversification across asset classes
-Risk and return are balanced
-Liquidity is moderate
Islamic Private Equity Fund
-Invests in unlisted Shari’ah-compliant companies
-Focuses on long-term value creation
-Involves active management and business development
-High risk with potentially high returns
-Very low liquidity due to long lock-in periods
Islamic Venture Capital Fund
-Invests in early-stage and start-up halal businesses
-Aims for high growth and capital appreciation
-Highest risk among Islamic investment funds
-Returns depend on business success
-Liquidity is very low as exits take time
Key Takeaway
-All Shari’ah-compliant investment funds follow strict screening and purification rules
-Returns are performance-based,not guaranteed
-Choice of fund depends on investor risk appetite,liquidity needs,and investment horizon
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