Download Investment Embracing Sharia Principles

Investment
Embracing
Shari’ah Principles
JSE – September 2006
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Contents
1. What is Islamic Finance?
2. Development of Islamic Fund Management
3. The Oasis Experience in Islamic Fund
Management
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What is Islamic Finance?
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Features of Islamic Finance
• Partnership - sharing Risk & Reward
• discourage debt & situations of credit default
• Real Assets back every transaction
• discourage financial hybrids and derivatives
• Avoids investing in ‘the sins’
• e.g. pork, alcohol, tobacco, gambling, etc.
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A low risk investment alternative
• Speculation avoidance
• no derivatives etc.
• Debt avoidance
• reduced interest rate risk
• Asset backed investments
• endure bear markets
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Development of
Islamic Finance
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Support & growth of Islamic finance
• Gordon Brown pledged support for the
growth of Islamic finance
• Sukuk market had grown to $41 billion*
- Expect $9 bil new sukuk’s in next 6 months*
• Western Institutions are getting involved
- ₤3.3 billion for Dubai Ports project - underwritten
by Barclays Capital
* source: Financial Times (July 2006)
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Growth in Islamic financial institutions
Institutions
• Fastest growing global financial sector
300
250
200
150
100
50
0
+ 55% growth
1997
2006
• In more than 75 countries (Bahrain & Malaysia the largest hubs)
• Total assets exceed $250 billion and are growing at 15% a year
Source:
Institute for International Research, Institute for Islamic Banking & Finance
of Bank and Islamic Financial Institutions, IMF (F&D 2005)
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Reasons for growth in Islamic finance
• Strong demand for these products
• modern investment products facilitate greater choice
• low risk investment alternative avoids:
 increased market volatility
 high-risk speculative activity
 greater potential to erode capital
• Growth in wealth & education of investors
• particularly in oil rich & industrialized countries
• increased wealth facilitates improved education
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Fostering growth in Islamic finance
REGULATION
CREDIBLE
BENCHMARKS
Foundation for
universal
application
SPECIALISATION
AND COOPERATION
ENHANCED
PRODUCT
Promoting
accountability and
transparency
Increased participation
of service providers
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Regulation and transparency
The Islamic Finance Framework provides:
REGULATION
TRANSPARENC
Y
• Highest global standards
• Reporting performance, etc.
• Increased credibility
• Promotes accountability
Foundation for universal application of
GLOBAL FUND MANAGEMENT OPERATION
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Regulatory and institutional standards
1985 Organisation of the Islamic Conference (Islamic Fiqh Academy)
1989
Accounting and Auditing Organisation of Islamic Financial
Institutions (AAOIFI)
1999 Islamic Corporation for Economic Development
2001
General Council for Islamic Banks and Financial Institutions
(GCIBFI)
Saudi
Arabia
Bahrain
Saudi
Arabia
Bahrain
2002 Islamic Financial Services Board (IFSB)
Malaysia
2002 Islamic International Rating Agency (IIRA)
Bahrain
2002 International Islamic Financial Market (IIFM)
Bahrain
2002 Liquidity Management Centre
Bahrain
• Collaboration with regional regulatory bodies
• Aligning regulatory standards globally
• Co-operating with world governing institutions (IMF, IOSCO, WB)
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Product Innovations in Islamic Finance
• Islamic mutual funds (diversified across asset classes)
• Equity investment products
• Sukuks (Islamic bonds)
• Real estate investment products
• Islamic hedge funds
• Short term investment instruments
• Takaful (Islamic insurance)
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Growth in Islamic Mutual Funds
• Islamic equity fund assets grew ± 25% between 1997 to 2003
• Total of 330 listed Islamic Investment Funds*
• Products include:
• Equity funds
• Real estate and property funds
• Murabaha funds (contract for purchasing asset by bank at cost +
profit)
• Commodity funds
• Leasing funds
* source: Eurekahedge.com
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Oasis experience
in Islamic Fund Management
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At Oasis regulation is KEY…
• Highest form of European Regulation - (UCITS)
• Regulatory Oversight
• Irish Financial Services Regulatory Authority (IFSRA)
• South African Financial Services Board (FSB)
• Johannesburg Stock Exchange (FTSE/JSE)
• South African Reserve Bank (SARB)
• Institutes & Affiliations
• CFA Institute (Global)
• Dublin Funds Industry Association (Ireland)
• Institute of Retirement Funds (South Africa)
• Association of Collective Investments (South Africa)
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… as is its Shari’ah regulation …
External regulation
• Accounting & Auditing Organization for Islamic Institutions (AAIOFI)
• International Association for Islamic Economics (IAIE)
• Islamic Financial Services Board (ISFB)
• General Council for Islamic Banks & Financial Institutions (GCIBFI)
Internal regulation
• Independent Shari’ah Advisory Board
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… and investment skills are KEY KEY KEY!
• Tremendous growth in Islamic finance has resulted
in a dearth of Shari’ah fund management skills
• Oasis has honed its Shari’ah investment skills over
the last nine years – evidence of its success may be
gauged from its performance
• Developed infrastructure to invest in any geographic
region
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The Crescent product range of Oasis
• South African Products
Equity 
Property 
Balanced 
• Global Products
Equity 
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Property 
Oasis Crescent Equity Fund - Performance
Aug 98
to
Dec 98
1999
15.5
79.9
12.5
52.6
18.1
20.1
26.9
FTSE / JSE
All Share
Index
(19.9)
70.8
0.4
32.6
(8.3)
16.1
Ave
General
Equity
Fund
(21.7)
50.7
(3.5)
21.5
1.6
22.6
Oasis
Crescent
Equity
Fund*
2000
2001
2002
2003
2004
Since
Inception
July
Cum
Ann
34.6
15.8
899.1
33.3
25.5
47.3
17.0
319.1
19.6
38.6
36.9
12.0
262.8
16.6
* # 1 since inception to July 2006
Source: S&P Micropal
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2005
YTD
2006
Oasis Crescent Equity Fund - Performance
Sortino
Ratio Rank
Sharpe
Ratio
Info
Rank Ratio Rank
Oasis Crescent
Equity Fund
5.2
1
2.6
1
2.0
2
FTSE-JSE All Share
Index/ Average
Competitor (Info)
0.9
5
0.6
14
0.4
9
Source Data: S&P Micropal & Bloomberg; Since inception to July 2006
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Oasis Crescent Equity Fund - Value Add
R100 Investment in the Oasis Cresent Equity Fund
(Inception to July 2006)
1,200
1,000
R 999.1
Oasis Crescent Equity Fund
Rands
800
FTSE/JSE All Share
Average General Equity Fund
600
R 419.1
R 362.8
400
200
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Source: S&P Micropal; August 98 – July 2006
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Jul-06
Oasis Crescent Equity - Performance
900
Oasis
899.1
FTSE/JSE All Share Index
Return (%)
700
Overall
96 months
500
Bear
41 months
Bull
55 months
300
100
4.6
(0.4)
(100)
6.0
(4.0)
Source: S&P Micropal; August 98 –July 2006
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319.1
Crescent Global Equity Fund – Ratings
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Crescent Global Equity Fund – Ratings
Risk/Reward
Vs Benchmark
1
3 Year
5 Year
10 Year
Alpha
5.5
10.5
-
Beta
1.0
0.8
-
R-squared (%)
82.5
81.4
-
Tracking Error
4.1
5.9
-
Info Ratio
1.6
1.8
-
Excess Return
6.6
10.5
6.1
Miscellaneou
s
3 year
5 year
Stnd Deviation
9.8
12.5
Sharpe Ratio
1.9
1.0
Sortino Ratio
4.3
1.7
Ratings at of 2006-07-31
Morningstar
Overall
3 Year
5 Year
10 Years
4*
4*
4*
-
Risk
-
1.1
1.8
-
Return
-
15.8
11.2
-
135
135
95
-
Rating
Investments Rated
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Crescent Global Equity Fund - Performance
Dec
2000
Crescent Global
Equity Fund
Dow Jones IM Index
MSCI World Index
2001
2002
2003
2004
2005
YTD
2006
(Aug)
Cum
Ann
0.0
(2.0)
(0.7)
33.4
21.7
11.5
16.8
105.7
13.4
(0.3)
(19.2)
(21.5)
30.2
10.6
10.1
7.6
7.8
1.3
1.6
(16.5)
(19.5)
33.8
15.2
10.0
9.9
27.2
4.3
Source: S&P Micropal; Dec 2000 – Aug 2006
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Since
Inception
Crescent Global Equity Fund - Performance
Sortino
Sharpe
Information Ratio
Ratio
Ranking*
Ratio
Ranking*
Ratio
Ranking*
1.22
8th
0.98
7th
1.42
10th
Dow Jones IM Index / Average
Global Equity Fund (Info ratio)
(0.15)
269th
0.01
264th
0.46
127th
MSCI World Index / Average
Global Equity Fund (Info ratio)
0.10
137th
0.22
125th
(0.30)
191st
Crescent Global Equity Fund
Source: S&P Micropal; Dec 2000 – Jul 2006
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Crescent Global Equity Fund - Value added
2.3
Crescent Global Equity Fund
2.0
$ Millions
1.8
$2.0m n
MSCI World Index
Average Global Equity Fund
1.5
1.3
$1.2m n
$1.1m n
1.0
0.8
0.5
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Source: S&P Micropal; Dec 2000 – Jul 2006
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Jul-06
Crescent Global Equity Fund – Performance
105
97.7
OASIS
Return (%)
85
MSCI Index
Overall
68 months
65
45
25
Bear
30 months
Bull
38 months
3.1
5
(1.7)
(15)
2.8
(3.6)
Source: S&P Micropal; Dec 2000 – Aug 2006
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23.9
Listing of first Shari’ah
compliant property fund
OASIS CRESCENT PROPERTY FUND
Listed on Alt-X in November 2005
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Social contribution - Crescent Fund Trust
A charitable trust uses Non-Permissable Income (NPI) to
develop and promote:
Dermatology Unit
Health Care: Red Cross Children’s Hospital
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Social contribution - Crescent Fund Trust
Education: As Salaam
• An initiative which aims to help
communities accelerate the
education and training of the
youth through self help
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The future of Islamic Finance
• Young rapidly growing sector
• Opportunities are great
• The demand is in place
• The regulatory framework is in place
• Prolific development of product
• Products are innovative, highly regulated and transparent
• The lower risk proposition is attractive
• Attractive proposition for a global audience
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Past performances are not necessarily an indication of future
performances. No guarantees are provided. Any calculations made
are approximations, meant as guidelines only, which you must
confirm before relying on them and also at the time of finalising any
transaction. Oasis will therefore not be held responsible for any
inaccuracies in calculations supplied. All the information appearing
on the slides is provided without a representation or warranty
whatsoever, whether express or implied. Oasis makes no
representation or warranties about the correctness or the suitability
of any products or service that appear nor the soundness of any
general advice offered. Oasis shall not be responsible and
disclaims all liability for any loss, liability, damage (whether direct,
indirect, special or consequential) or expense of any nature
whatsoever, which may be suffered as a result of or which may be
attributable, directly or indirectly, to the use of, or reliance upon any
information, links or service provided, or any actions and/or liability
for consequential or incidental damages. Oasis Asset Management
and Oasis Crescent Capital Management are authorised Financial
Services Providers.
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