Reprising sharia portfolios after the Great Coronavirus Crash of 2020


In early May this year I shared some important findings about sharia investing in times of coronavirus. As was evident then there is substantial downside protection in globally allocated portfolios that are constructed according to sharia standards. It’s a good time now to revisit that subject.

First, a disclaimer. Since the May report we’ve added some analytical horsepower with NAVA Capital in Sierre, Switzerland. The resulting allocations are more precise. Second, we retain the same securities but fine-tune the allocations as indicated in the pie chart above.

The sharia portfolio comprises 14 securities covering all asset categories. Positions are optimized within and among assest categories. Every security is chosen from the larger universe of sharia-compliant mutual funds and ETFs after massive qualitative and quantitative measurements and screening.

Remember, every security on the Buy List was available for anyone to purchase during the measured time period. Each one would likely pass the investment committee of any global asset manager in terms of size, liquidity, track record, jurisdiction and other measures. In other words, every mutual fund and ETF in the sharia portfolio construction meets tough regulatory and professional standards.

And, I suggest that the sharia portfolio construction follows precisely those methods to select, allocate and optimize securities at any of the world’s major asset management firms.

We define the generic Growth investment strategy for the sharia portfolio, and find four conventional peers for comparison, two from Switzerland (UBS and Credit Suisse) and two from the United States (Franklin Templeton and BlackRock), choosing the Growth portfolio strategy funds from each. Overall, these are as apples-to-apples comparisons as we can reasonably make.

Here we see performance 1 January 2017 to 23 June 2020. It’s clear enough that during most of the measured time period the sharia portfolio matched and occasionally exceeded the return of the conventional peers. But, there is easy visual confirmation that sharia begins to catch up and surpass the peers during two key downturns: the interest-rate scare toward the end of 2018, and the massive coronavirus crisis during the spring of 2020.

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Source: John Sandwick | LinkedIn

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