Islamic Mutual Funds

Elfakhani, Said; Hassan, M. Kabir; Sidani, Yusuf

doi:10.4337/9781847205414.00026

Cited by 47 publications

(40 citation statements)

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“…Previous findings suggest that sector screening imposed by Islamic funds would not seem to negatively affect performance (Ahmed, 2001; Wilson, 2001). Similar findings were provided by Hakim and Rashidian (2004), Elfakhani and Hassan (2005), Abderrezak (2008), and Hayat and Kraeussl (2011) who report no statistically significant difference between the risk adjusted performance of Islamic mutual equity funds or indexes and their conventional benchmarks. Hussein and Omran (2005) suggest that Islamic indices may provide better returns than conventional indices in times of financial distress.…”

Section: Literature Reviewsupporting

confidence: 81%

Is it costly to be both shariah compliant and socially responsible?

Erragragui

Revelli

2016

Rev Financ Econ

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Positive ethics associated with socially responsible investments (SRI) is challenging the limits of Islamic investments' conservative approach to promote corporate social responsibility. In this study, we test the integration of social performance measures (companies the most virtuous or high-rated in terms of environmental, social, and governance (ESG) issues) in Islamic portfolios using KLD social ratings. We seek to determine the financial price of complying both to Islamic investment and SRI principles. To do so, we measure the financial performance of self-composed Islamic portfolios with varying ESG scores. The results indicate no adverse effects on returns due to the application of ESG screens on shariah-compliant stocks during the 2007-2011 periods while reporting substantially higher performance for the portfolios with good records in governance, products, diversity, and environment issues. On the opposite, a negative performance is associated with an SRI strategy of disengagement from shariah-compliant stocks with community and human rights controversies. Our performance measures are controlled for market sensitivity, investment style, momentum factor, and sector exposure.

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Section: Literature Reviewsupporting

confidence: 81%

Is it costly to be both shariah compliant and socially responsible?

Erragragui

Revelli

2016

Rev Financ Econ

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“…They also avoid investing in 'unethical' companies and the operation of the fund must adhere to Shariah requirements, including the avoidance of speculation, short selling, and derivatives. There is also the need for the fund management company to perform purification activities (Elfakhani and Hassan, 2005). This is arguably a more restrictive form of investment behaviour than that found in most SRI funds.…”

Section: Introductionmentioning

confidence: 99%

Comparative performance-related fund flows for Malaysian Islamic and conventional equity funds

Marzuki

Worthington

2015

International Journal of Islamic and Middle Eastern Finance and Management

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Australia AbstractPurpose -Compare the fund flow-performance relationship for Islamic and conventional equity funds in Malaysia.Design/methodology/approach -We employ panel regression models to estimate the relationship between fund flows and performance for Islamic and conventional equity funds in Malaysia from 2001 to 2009. The data for each fund include fund flows, assets under management, management expenses, fund age, portfolio turnover, fund risk, fund return, and the number of funds in the fund's family. We also include market returns and fixedyear effects. Our sample consists of 127 Malaysian equity funds with at least 65 per cent domestic equity holdings comprising 35 Islamic and 92 conventional equity funds.Findings -Islamic fund investors respond to performance in much the same way as conventional fund investors, increasing fund flows to better performing funds, and decreasing fund flows to poorer performing funds. However, there is evidence that Islamic fund investors are relatively less responsive toward poorly performing Islamic funds, suggesting an asymmetry in the fund flow-performance relationship. When choosing funds based on other fund attributes, Islamic fund investors again exhibit similar behaviour, and like conventional fund investors direct larger percentage fund flows into smaller funds as well as funds with larger past fund flows and those with higher management expenses, possibly signifying marketing expenditure.Research limitations/implications -We were only able to access data on annual net fund flows not quarterly or monthly fund inflows and outflows as usual in developed markets and this may obscure some important aspects of investor decision-making. There is also insufficient data for matched-sample techniques, which may better control for fund-specific characteristics than our regression-based approach.Practical implications -Islamic funds like conventional funds will experience increased fund flows with better performance and vice versa. However, Islamic fund investors appear somewhat less likely to remove monies from poorly performing funds. We believe this is because investors either place a premium on the nonperformance-related attributes of Shariah-compliant funds and/or because they wish to avoid search costs in finding another suitable Islamic fund. Apart from this, Islamic and conventional fund investors behave in a similar manner, and we believe this is possible in Malaysia given the size and diversity of its Islamic fund sector.Originality/value -One of very few empirical studies concerning the behaviour of Islamic investors, particularly in Malaysia, primarily because of limitations in data availability.

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“…Despite the growing interest in Islamic finance, there are few empirical studies exploring the performance of Islamic investment vehicles. Elfakhani and Hassan (2005) analyze the performance of 46 international Islamic mutual funds from 1997 through 2002 in comparison to a corresponding Islamic market index and a conventional market index. Based on the traditional measures of Sharpe, Treynor, and Jensen, their results suggest that the performance of Shariacompliant funds and the chosen benchmarks is very similar.…”

Section: Introductionmentioning

confidence: 99%

Islamic investing

Walkshäusl

Lobe

2012

Rev Financ Econ

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Using a large international sample of 35 developed and emerging markets, we analyze whether Islamic indices exhibit a different performance to conventional benchmarks. While there is no compelling evidence of performance differences in robust Sharpe ratio tests and after controlling for market risk, we find a significantly positive four‐factor alpha for the aggregate developed markets region. This outperformance stems, however, mainly from the U.S. and is largely attributable to the exclusion of financial stocks in Sharia‐screened portfolios. As the extensive downturn of financials is related to the recent financial crisis, we do not argue that this outperformance will continue over time. The style analysis reveals that Islamic indices invest mainly in growth stocks and positive momentum stocks. This, for a passive portfolio intriguing result can, however, be explained by the strong sector allocation towards energy firms and their strong momentum characteristic during the sample period.

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Islamic Mutual Funds

Cited by 47 publications

References 0 publications

Is it costly to be both shariah compliant and socially responsible?

Is it costly to be both shariah compliant and socially responsible?

Comparative performance-related fund flows for Malaysian Islamic and conventional equity funds

Islamic investing

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