The Lotus Capital Halal fund has its investment universe as securities of companies quoted on the Nigeria Stock Exchange (or other securities exchange), excluding those prohibited by Islamic law.
Judging by the religious structure of Nigeria’s population, one is left rather surprised that the Lotus fund is the first listed Halal fund on the NSE. Its surprising in that the NSE is Africa’s third largest exchange and the country is reported to be predominantly Islamic yet the first Halal fund has just been authorised. Then again, stocks and funds themselves are a relatively new concept to most leave alone ethically based funds.
Financial products tailored particularly to meet the needs of Islamic law have historically provided considerably competitive returns as have Catholic value based funds. Religious leanings aside, the ethically aware investor ought to closely scrutinise the merits of ethical investing.
2-3 yrs ago I carried out some research on US ethical investment funds vs. the S&P 500; primarily KLD Indexes vs the S&P 500. Surprisingly the KLD Indexes performed rather well when compared to the S&P 500, the predominant US benchmark. ....But that was before I flipped the idea on its head and looked at ‘sin-funds’ i.e those that invest primarily in alcohol, tobacco, weapons, naughties and the like – basically stuff that grandma would frown upon.
It turned out that ‘sin-funds’ massively outperformed the S&P 500...at least for the review period. Boy would I like to see the effects of the financial crisis on the ethical funds! ...It would also be pretty interesting to see the results of a similar study in other parts of the world.
For the East African market, an ethical fund would have quite an impact on the investment universe; no EABL, no Kenya Re, no Centum, no BAT ...that probably leaves an investment manager with less than ten investable listed companies.
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