Creating an Investment Landscape for Shariah Compliant Asset Managers

Shariah Compliance is ideal for those Asset Managers who are looking to attract Capital from a Global Community who believes in long-term growth

The Islamic community has been largely considering investing in financial products that comply with the Shariah law and has been on the lookout for Asset Managers that can put together ideal financial tools that would permit them to invest in long-term growth.

Equity play has been a favorable investment strategy for ages while ensuring that most investment opportunities followed a thorough process to fully comply with the Islamic standards, especially when it comes to Gold investing. This is thanks to the ruling by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in November of 2016 alongside the World Gold Council.

Shariah compliance also aims to increase the level of transparency in investments. This new standard is set to act as the international standard in terms of an allocated Gold Savings plan. In that sense, it’s a strategic allocation of funds to accumulate Gold long-term. This law may also be used for Gold certificate investing, physically gold-backed ETFs, certain gold mining future, and of course, in Gold Mining equities. You can read more here.

Looking at the current markets, Islamic finance is a small $2 trillion marketplace and is expected to grow to about $5 trillion by 2020 as stated by TrueWealth publishing.

How does this impact Asset Managers?

Understanding the context of which the Shariah Financial System is based on may help in identifying strategic allocations and may result in creating a compliant fund that focuses on servicing this growing community.

Another thing to note is the fact that there is very little guidance for Islamic investors who are looking for fail-safe and reliable investment arms that have the potential of long-term gain. The core of it all implies that Asset Managers can now focus on creating funds or investment products that may resemble equities which are compliant with certain rules and regulations which are set out on the Islamic Investing Laws.

Since the concept on the ruling of the new laws that set out standards in Gold investing, the most impact will be directed towards the mining sectors and the gold stocks. Wealth and Asset Managers need to keep that in mind while building strategic and tactical portfolios for these types of investors.

Moreover, a strong focus needs to be put towards identifying fully compliant distinct opportunities in the private sector. Since in most cases – some of the funds in the past have become questionable due to their lack of transparency.

The opportunity for Gold Backed Ventures

Gold Backed Bonds, LLC has been putting together vehicles and structures for companies who are looking to raise anywhere between $50 to $250 million for expanding or acquiring businesses. While this may be the ideal model for the proposed Islamic community, it still greatly considers aligning with the debt servicing business, which in turn, makes it non-compliant.

To address this issue, Gold Backed Bonds has put together a Shariah Compliant vehicle by which Islamic institutional and high-net-worth investors may participate through equity in the Gold Ventures for mining. The important distinction in this model is that the GBB team identifies the right types of mining assets and engages in leasing out the collateral to create asset-backed bonds in order to help companies who are technically in the middle market range, raise substantial capital.

While there may be a debt servicing component, the Shariah Compliant side of the business ensures that the limits of the investment activity are only tailored around mining the gold. This model proposes the best of both worlds in terms of participation and for assisting businesses leverage Gold assets for flexible financing.

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