ISLAMIC WEALTH MANAGEMENT
At the beginning of a new frontier
John A. Sandwick
Managing Director
Encore Management S.A.
Geneva, Switzerland
International Islamic Finance Forum
13 November 2006
Zurich, Switzerland
Modern Portfolio Theory:
Diversification & Risks
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MPT: development of basic concepts
Harry Markowitz:
Systematic & Specific Risks
Nobel Prize
James Tobin:
Leverage for Efficient Portfolio
Nobel Prize
William Sharpe:
Capital Asset Pricing Model
Nobel Prize
MPT: a Tool for Rational Investors
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Constructing a portfolio of heterogeneous
assets that achieves the highest risk-adjusted
returns for client accounts
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Constructing a portfolio that could withstand
shocks and deliver returns based on the
rational expectations of the future
Pillars of MPT
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Quantitative analysis
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Common sense
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No religious affiliation
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Universal nature and application of MPT
MPT & Islamic Finance
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Islamic Wealth Management: an idea, a vision,
a practical reality?
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Challenges facing Islamic Finance Industry
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Lack of sufficient Sharia compliant assets to
meet the demands of Muslim investors
Modern Traditional Portfolio & Common
Income Strategies
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Risk diversification: stocks, funds, bonds & cash
Risk diversification & factor of investor’s age
Bonds as integral part of any traditional portfolio
SECURITY
% OF PORTFOLIO
Cash (in the form of deposits)
5%
Bonds (diversified)
50%
Stocks (diversified)
25%
Alternative Investments (diversified)
15%
Real estate (diversified)
5%
Total
100%
Islamic Sharia Portfolios
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Risk diversification: stocks, bond substitutes (sukuk), murabaha,
equity & real estate funds, cash
Lack of bond substitutes in the market makes diversification difficult
Majority of Muslims cannot invest their assets according to MPT
SHARIA-COMPLIANT SECURITY
% OF PORTFOLIO
Cash (in the form of murabaha)
5%
Sukuk (diversified pool of Islamic bonds)
50%
Stocks (diversified)
25%
Alternative Investments (diversified)
15%
Real estate
5%
Total
100%
Islamic Sharia Portfolios
SHARIA-COMPLIANT SECURITY
Cash (in the form of murabaha)
PORTFOLIO
$50,000
SUKUK (DIVERSIFIED POOL OF ISLAMIC BONDS)
$500,000
Stocks (diversified)
$250,000
Alternative Investments (diversified)
$150,000
Real estate
$50,000
Total
$1,000,000
Sharia Compliant Investing
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Broader Sukuk issuance is needed
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Situation in the Western banks serving Muslim clients
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Sharia compliant products should be available to
average Muslim investor
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Malaysian Sukuk market: highly evolved but limited for
other Muslims in terms of Sharia interpretations,
geographical concentration risks and currency
concentration risks
Sanad Sukuk Fund
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The innovative & revolutionary approach to Islamic investment
The world’s first diversified Sukuk investment vehicle
Available for all Muslim investors
Asset Allocation & Sanad Sukuk Fund
SHARIA-COMPLIANT SECURITY
Cash (in the form of murabaha)
PORTFOLIO
$50,000
SANAD SUKUK FUND (DIVERSIFIED POOL OF ISLAMIC BONDS)
$500,000
Stocks (diversified)
$250,000
Alternative Investments (diversified)
$150,000
Real estate
$50,000
Total
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$1,000,000
$100 million startup fund
z Sanad Sukuk Fund & Sharia compliance issues
z Credit quality (profits higher than LIBOR)
THANK YOU!