Moazzam Ahmed, a software developer in Kirkland, tried for years to square his investment goals with the tenets of Islam. "There was a lot...
NEW YORK — Moazzam Ahmed, a software developer in Kirkland, tried for years to square his investment goals with the tenets of Islam.
“There was a lot of research that I had to do on my own,” he said, referring to the time he spent poring over potential investments to weed out objectionable businesses. “I probably still made mistakes.”
Then, several years ago, he discovered a mutual-fund company that complied with Shariah, or Islamic law, and he soon rolled over his 401(k) to the funds. The funds prohibit investments in companies whose focus is on alcohol, tobacco, gambling, pornography or insurance.
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Ahmed hadn’t just found a family of funds that aligned with his religious principles, he’d discovered funds that produced strong returns and managed to sidestep the implosion of Enron and WorldCom, as well as the more recent mortgage debacle.
While Wall Street puts much of its faith in money, there are funds guided by religious principles that can keep up with or even outperform many funds with fewer restrictions on how they invest.
Ahmed said his investment in the Amana funds, which are run by Bellingham-based Saturna Capital, meant he didn’t have to give up financial returns for his religion.
The Amana funds bar investments in companies that have large debts or that draw a sizable portion of their profit from earning interest.
Not being able to invest in banks might seem like an onerous requirement given that financial-services companies make up about a quarter of the benchmark Standard & Poor’s 500 index.
But that’s been a welcome prohibition lately because so many financial companies are struggling with souring mortgage debt.
Monem Salam, director of Islamic investing and deputy portfolio manager for Saturna, said the funds’ conservatism has benefited its investors.
“We don’t buy any companies that are doing something that would be against the tenets of Islam,” he said. “We’ve come up with some financial criteria to limit a company’s exposure to any form of riba, or interest.”
The fund relies on a group of Islamic scholars to help determine what types of investments are acceptable.
“I think we have a good system of how we manage money. We also have one step more than any other ethical fund, which is that we also avoid the financial companies, which, in this environment, has really worked out,” Salam said.
Fund up, market down
The Amana Trust Income Fund, for example, was up more than 1 percent for the year through mid-May, while the broader market was down. Amana’s growth fund was down about 1 percent for the year, ahead of the major market indexes. Both funds have average annual total returns of more than 19 percent over five years.
The performance has drawn attention. In the past two to three years, 60 to 70 percent of investors have been non-Muslims, and assets have ballooned from about $40 million in 2003 to more than $1 billion.