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Sector Review: GCC Aggressive Funds

The Islamic Finance Information Service's GCC Aggressive Funds sector is the second of the balanced funds sectors we will be covering in The Islamic Globe following our coverage of the GCC Conservative Funds sector last week.

The Aggressive Fund Sector is defined by IFIS as follows: 'Funds will invest more than 60% but less than 80%of total assets in equities, and the rest in cash and bonds/fixed income securities. This type of fund is classified as higher risk, but less so than equity funds.'

This fund seems to be a more popular asset class than conservatively-managed funds. There is obviously the attraction of larger gains than that available from conservative funds - but the flip side of high rewards is higher risk and the potential that things will go wrong and you could lose money.

In the case of the majority of these funds, the latter is truer than the former. For example if you had been investing in the $68m Al Yusr Saudi Equity fund managed by Saudi Hollandi Capital in the five years leading up to December 31, 2010 you would have had a negative total return of -95.3%. In fact of the five funds that have a five year track record, only one of them, the $11.5m Al Shuja'a Sharia Compliant Portfolio, managed by Saudi Arabia's Riyad Capital , offered positive returns. In this case 11.6%, less than the best performing fund over five years from the GCC Conservative Funds Sector, the $18.9m Al Hadi Sharia Compliant Portfolio, also managed by Riyad Capital , which we covered last week. That is the risk an investor takes - but sometimes it does pay dividends.

Oasis launches low risk equity fund

South African fund manager Oasis has launched a new low risk fund called the Oasis Crescent Global Low Equity Balanced fund.

The fund is managed on a lifestyle matrix, where assets are gradually switched out of higher risk equities, to lower-risk Sukuk and eventually to cash as the investor nears retirement.

The new fund maximizes capital protection and protects an investor's 'pot' from the erosional-effect of inflation and is aimed at Takaful firms, governments and charities whose primary objective is capital protection.

Despite the fund investing in a low equity environment it will offer some capital growth. Oasis was unavailable for comment when The Islamic Globe contacted it, but Adam Ebrahim the firm's CEO and CIO said in a statement: "This marks a significant milestone in our objective to offer investors a global investment range that addresses their investment needs over all life stages."

DWS Noor lights the way

The $49.7 DWS Noor Precious Metals Securities Fund Class B has been a consistent top performer in the IFIS GCC Aggressive Funds sector.

Launched on October 17, 2006 the fund aims to achieve capital appreciation in the medium- to long-term by investing in a portfolio of Shari'ah compliant equity and equity-related securities (including depositary receipts and convertible securities, but excluding preferred shares, bonds, convertible bonds and warrants) listed or traded on recognized exchanges, of companies engaged in activities related to gold, silver, platinum or other precious metals.

The sub-fund will ensure that at all times, at least two-thirds of its total assets will be invested in equity or equity related securities of companies engaged in activities related to precious metals as described above. The remaining one-third of the assets of the Sub-Fund may be held in non-interest bearing cash balances.

The fund is managed by Deutsche Asset Management's Manuel Tenekedshijew, domiciled in Dublin, and the Shari'ah advisor is Khalij Islamic in the British Virgin Islands.

The fund has had an absolute return of 32.88% over one year to February 28, 2011 and an absolute return of 0.66% over three years, according to DWS.

Since inception, the fund has had 21 positive periods of return against 15 negative periods of return and alpha of 10.65, indicating that the fund manager has outperformed his benchmark (a composite commodity and energy index) by more than 10 times, according to Trustnet.

Tenekedshijew said: "After the early January sell off of commodities, precious metals and precious metals equities the fund continued an upward trend to late February before being hit by another broad commodity market corrective phase.

"Year-to-date fund performances and precious metals equities are lagging the underlying metals index but have the potential to close the gap. In the short-term, precious metals and precious metals equities are responding to broad market moves, however in the longer term, based on fundamentals we believe precious metals will outperform broader commodities.

"We saw signs of this outperformance in the fourth quarter 2006 when gold significantly decoupled from key commodities oil and copper."

The Class B fund has a 5% up-front fee and an annual management charge of 0.75%.

© The Islamic Globe 2011

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