201403 Islamic Business and Finance, Top performing Shariah-compliant equity fund
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www.cpifinancial.net FUNDS 34 Islamic Business & Finance | ISSUE 83 Ian Lancaster, CEO and Founder of Cogent Asset Management, explains how the WSF Global Equity Fund has maintained, according to Morningstar data, the number one spot for its performance since its launch in August 2010 Funding success Ian Lancaster W hen the WSF Global Equity Fund was launched, Islamic equity funds were – and largely still are – few and far between. Demonstrating a pent up demand in a relatively untapped market, it has provided an annualised return of 17 per cent. It is now one of the largest Islamic equity funds available. Ian Lancaster spoke to Islamic Business & Finance about managing a successful Islamic equity fund. What was the concept behind the launch of the WSF Global Equity Fund? “The fund was launched over three years ago in August 2010 as we felt that there was little choice available for Islamic investors in the global equity space. In fact there are still less than 20 Shari’ah-compliant global equity funds available, compared to thousands of conventional equity funds. Competing Shari’ah-compliant managers also tend to come from the Middle East and Asian regions, with little experience in global equity investing. Within this environment, we continue to believe that our proprietary investment style and experience of international markets gives our investors a significant advantage.� How has the market reacted to the fund since its launch? “The fund started with a small amount of initial seed capital provided by a European-based institution.
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Top performing Shariah-compliant equity fund
Transcript of 201403 Islamic Business and Finance, Top performing Shariah-compliant equity fund
www.cpifinancial.net
FUNDS
34 Islamic Business & Finance | ISSUE 83
Ian Lancaster, CEO and Founder of Cogent Asset Management, explains how the WSF Global Equity Fund has maintained, according to Morningstar data, the number one spot for its performance since its launch in August 2010
Funding success
Ian Lancaster
W hen the WSF Global Equity Fund was launched, Islamic equity funds were
– and largely still are – few and far between. Demonstrating a pent up demand in a relatively untapped market, it has provided an annualised return of 17 per cent. It is now one of the largest Islamic equity funds available. Ian Lancaster spoke to Islamic Business & Finance about managing a successful Islamic equity fund.
What was the concept behind the launch of the WSF Global Equity Fund?“The fund was launched over three years ago in August 2010 as we felt that there was little choice available for Islamic investors in the global equity space. In fact there are still less than 20 Shari’ah-compliant global equity funds available, compared to thousands of conventional equity funds. Competing Shari’ah-compliant managers also tend to come from the Middle East and Asian regions, with little experience in global equity investing. Within this environment, we continue to believe that our proprietary investment style and experience of international markets gives our investors a significant advantage.�
How has the market reacted to the fund since its launch?“The fund started with a small amount of initial seed capital provided by a European-based institution.
www.cpifinancial.net
FUNDS
35ISSUE 83 | Islamic Business & Finance
Since then it has been marketed predominantly in the Middle East and Europe, creating a steady f low of new investors. After winning the Islamic Business and Finance Award for Best Islamic Global Equity Fund in 2012 we saw significant inflows, making the fund one of the largest Shari’ah-compliant global equity funds.�
What factors have allowed it to maintain its number one spot for performance since its launch?“I believe this is because our proprietary investment process is somewhat different to that of mainstream investors. That is, we observe most of the fundamental indicators that traditional investors analyse, but we analyse the data in a consistent, repeatable and systematic way. The fund invests in companies around the world that offer the most compelling combinations of the most favourable
investment ‘styles’, such as value, growth or momentum at any point in time. Fund performance is therefore driven by our investment processes’ ability to identify and forecast these trends in order to ensure that the portfolio continually offers the appropriate balance of style exposure and has exposure to the best companies within each sector.�
Is being Shari’ah-compliant a factor in its success?“The advantage or disadvantage of being Shari’ah-compliant in terms of performance against conventional funds will ebb and flow with the equity market environment. Over longer periods there is no advantage or disadvantage. Over shorter periods whether the global banking and insurance sectors are in good health or not will strongly influence the returns of Shari’ah vs. conventional equity funds.�
The portfolio appears heavy on healthcare, industrials and IT – what makes these sectors appealing at the moment?“This is really just a consequence of the construction of the Shari’ah-compliant index, but it does highlight one very important point. When the banks and insurance companies are eliminated from the investable universe for Shari’ah-compliant reasons, the capital gets reallocated to the healthcare and IT sectors. The banks are now so highly regulated I would argue that investing more heavily in the high-growth sectors of healthcare and IT should provide better returns for investors.�
Does Cogent Asset Management have any other Shari’ah-compliant funds?“We manage other funds, but in the Shari’ah-compliant space we are focused on the Global Equity Fund;
Performance
cont. overleaf
USD Class 1BenchmarkAlternative Non-islamic Benchmark
200%
180%
160%
140%
120%
100%
80%
2010
-08
2010
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2010
-10
2010
-11
2010
-12
2011
-01
2011
-02
2011
-03
2011
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2011
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2011
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-12
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-01
www.cpifinancial.net
FUNDS
36 Islamic Business & Finance | ISSUE 83
Ian Lancaster is founder and CEO of Cogent Asset Management Ltd, advisor to WSF Global Equity Fund, the top performing Shari’ah-compliant fund.
this provides investors with a broad-based exposure to global equities as a solid foundation for their investment portfolios. However, our process also works well within local geographic regions, so we would look to partner with institutions to launch other Shari’ah-compliant funds in the near future.�
Do investors mostly subscribe to the fund for religious reasons, or does it tend more to be about returns?“As a retail fund, unit holders tend to be private investors or high net worth individuals, and their advisors are very focused on investment returns. It would certainly be wrong to assume
How has demand been for Shari’ah-compliant funds globally – how is this likely to change over the next few years?“At present, assets under management within Shari’ah-compliant mutual funds are around $70 billion compared to the global fund industry total of $90 trillion. The Muslim population is said to be around 25 per cent of the total world population, so the Shari’ah-compliant assets under management should therefore be much higher. To a large degree this population base is becoming wealthier and as the savings rate of the Muslim community increases I see tremendous growth potential for Shari’ah-compliant mutual funds. In addition I believe that conventional investors will start to see the structural and ethical benefits of investing in a Shari’ah-compliant manner. As these trends combine, the demand for Shari’ah-compliant funds will grow significantly.�
Absolute Per Annum
YTD 1m 3m 6m 1 year 2 years 3years 2 years 3 years
-2.33% 2.33% 2.63% 10.90% 18.47% 35.35% 43.97% 16.34% 12.92%
14.64% 9.82%
13.95% 7.12%
-2.81% 2.81% 1.00% 8.52% 16.33% 31.43% 32.46%
-2.99% 2.99% -0.18% 6.69% 14.23% 29.85% 22.92%
USD Class 1 USD Class 1
USD USD
Benchmark (S&P Development BMI Shari'ah Index) BenchmarkUSD USD
Alternative Non-islamic Benchmark (MSCI World)
Top Holdings
Holding Country %Apple inc USA 3.24QUALCOMM inc USA 1.82Samsung Electronics Co. Ltd South Korea 1.67CVS Caremark Corp USA 1.56McKesson Corp USA 1.56Thermo Fisher Scientific Inc. USA 1.49Raytheon Company USA 1.44ConocoPhillips USA 1.38Next PLC United Kingdom 1.37Helmerich & Payne Inc USA 1.33
Total number of holdings: 125
Alternative Non-islamic BenchmarkUSD USD
There are still less than 20 Shari’ah-compliant global equity funds available, compared to thousands of conventional equity funds
that a Shari’ah-compliant fund only appeals to Muslims. In essence because of their guiding philosophy, Shari’ah-compliant funds make ethically sound investments in companies with conservative levels of debt. This should be appealing to all investors, especially in light of the experience of the global financial crisis. In addition, as discussed earlier, more of the investor’s capital is allocated to high-growth sectors. According to Morningstar data, in addition to being the No 1 Shari’ah-compliant global equity fund since launch, the WSF Global Equity Fund is also in the top five per cent of conventional global funds with an annualised return of 17 per cent.�
cont. from pg 35
