SHARI’AH FUND GUIDE - syncbs.co.za · University of Cape Town and a BBA (Bachelor ... Murabaha...

A reference guide to Shari’ah compliant investing and the range of Shari’ah compliant fund options on the Glacier platform. At 30 September 2016, the Shari’ah All Share had delivered a three-month return of 2.10%, a one-year return of 4.69% and -3.37% over three years.

T H I N K W O R L D C L A S S

SHARI ’AH FUND GUIDENovember 2016 - Review of Quarter 3

SHARI ’AH BOOKLET BY GLACIER RESEARCH - Q3 - NOVEMBER 2016 2

THE TEAM

Imraan Khan

Imraan holds a BCom (Finance and Economics) degree and BCom (Hons) degree specialising in Finance and Investment from the University of the Western Cape (UWC). He is a CFA Level I candidate. He joined Glacier in 2011 as a Client Service Consultant from a Santam Graduate Program. Imraan joined the Glacier Research team in November 2016.

Shawn Phillips

Shawn holds a Bcom (Hons) degree in Financial Analysis and Portfolio Management from the University of Cape Town. He also holds a BSocSci degree in Philosophy, Politics and Economics from the University of Cape Town. Shawn joined Glacier Research in January 2016.

Liesl-Mari de Jager

Liesl-Mari holds a BA (Hons) degree in Industrial Psychology (Cum Laude) and MBA (Cum Laude). She has 18 years’ financial services industry experience of which five years were spent as an equity analyst. Liesl-Mari joined Glacier in 2002 and was previously the head of Glacier Risk and Compliance, then head of Glacier Research before taking up the role as head of Client andFund Solutions.

Luke McMahon

Luke holds a BCom (Acc) degree and BCom (Hons) degree in Business Administration from the University of the Western Cape (UWC). He is completing a Masters degree in Business Management from UWC. Luke joined Glacier Research in January 2016.

Thobela Mfeti

Thobela is a BCom (Hons) (Financial Analysis and Portfolio Management) graduate from the University of Cape Town. She also holds a post-graduate Diploma in Management from the University of Cape Town and a BBA (Bachelor in Business Administration) degree from TSiBA Education and has passed CFA Level I exam. She joined Glacier in May 2013 and the Glacier Research team in October 2013.

Francis Marais

Francis is a CFA Charter holder and holds a BCom (Hons) degree in Financial Analysis from the University of Stellenbosch. He started his career at Sanlam Employee Benefits as a fund accountant and later on as a review manager. He then spent four years as the Operations and Research manager at Nostic Asset Management (Category 2 Discretionary FSP). Francis joined Glacier Research in March 2015.

Darren Burns

Darren is a CFA charter holder and holds a degree in Investment Management (Stellenbosch University) and a BCom (Hons) in Financial Analysis and Portfolio Management from the University of Cape Town. He has completed RE 1, 3 and 5 exams and has the relevant experience as a representative and key individual for both a Cat I and Cat II licences. Darren joined Glacier from Secure Wealth, where he worked for seven years as a director, financial advisor and analyst. He joined Glacier as a Fund and Client solutions specialist in October 2016.

Johan Louwrens

Johan holds a BCom (Hons) degree in Financial Analysis from the University of Stellenbosch, and obtained his CFA Charter in October 2015 while completing his MSc in Financial Markets and Investments at SKEMA Business School (Paris Campus), graduating in December 2016. He started his career as a Corporate Action Specialist at Maitland Fund Services, he also worked as a Fund Accountant at Kleinwort Benson Fund Services, now part of JTC Group, and later joined SunGard Financial Systems, now part of Fidelity National Information Services (FIS), as a Product Specialist. Johan joined the Glacier Research team in November 2016.

Leigh Köhler

Leigh joined Glacier in 2003 after completing his BCom undergraduate degree in Politics, Philosophy and Economics from the University of Cape Town. He later qualified with a BCom (Hons) in Economics from UNISA. Leigh was previously the head of the Investment Administration team at Glacier before taking up the role as head of Glacier Research in 2012.

Johann-Hendrik Vlok

Jan holds a BCom degree in Investment Management and is currently completing a Post -Graduate Diploma in Financial Planning. He has completed all three CFA exams. Jan started his career as an administrator and underwriter at MUA Insurance. He joined MyWealthbook as a trader and later joined Findata Financial Services as a Para Planner. He joins the Glacier Research team in December 2016.


CONTENTS

Shari’ah Investing

Shari’ah-compliant Multi-Asset Fund Range 27four Shari’ah Balanced Fund of Funds Element Islamic Balanced Fund Kagiso Islamic Balanced Fund Old Mutual Albaraka Balanced Fund Stanlib Multi-Manager Shari’ah Balanced Fund of Funds

Shari’ah-compliant Equity Fund Range Element Islamic Equity Fund Kagiso Islamic Equity Fund Old Mutual Albaraka Equity Fund Stanlib Shari’ah Equity Fund 27four Shari’ah Active Equity Fund

Shari’ah-compliant Global Equity Fund Range Element Islamic Global Equity Fund

4

6

12

1314151617

18

19

789

10

11

SHARI ’AH BOOKLET BY GLACIER RESEARCH - Q2 - OCTOBER 2016 3


SHARI’AH INVESTING

The term Shari’ah literally means “the path to a watering hole” and refers to the fundamental code that governs Islam. Shari’ah law encompasses both religion and state-law, as under the principle of Shari’ah there is no distinction between the two. There are two main sources of Shari’ah law – firstly the Qur’an (Islamic holy book) and the example set by the Prophet Muhammad (PBUH) i.e. the Sunna.

Shari’ah investing therefore means investing in accordance with Islamic law and adhering to the principles that govern it. Up until a few years ago the number of Shari’ah compliant funds was limited to one or two asset managers, but over the last few years there has been a rise in the number of asset managers offering Shari’ah funds.

The five main principles that govern Shari’ah investing

• Ban on Interest: According to Shari’ah law both parties need to take risk when profit is earned, therefore one cannot invest in conventional fixed interest instruments.

• Ban on uncertainty: In terms of Islamic principles the future outcome of an investment needs to be free of major uncertainty. Speculative financial instruments like options and other derivatives therefore may not be used.

• Ban on financing certain economic sectors that are deemed to be non-permissible such as non-halaal meat products, gambling companies, weapon production, etc.

• Profit and loss sharing principle: Both parties to the financial transaction must share in the risks and the rewards attached to it.

• Asset-backing principle: Each transaction needs to be backed by or linked to a tangible underlying asset.

All asset managers that offer Shari’ah compliant funds need to have a separate and independent Shari’ah Advisory board. The board normally comprises religious scholars and takes on an advisory role, primarily ensuring that all investments comply with Shari’ah law.

Equity

Due to the fact that there are certain prohibited companies or sectors when investing in equities, all managers will screen shares in a two-step process:

• Qualitative Screening: this looks at whether companies are involved in permissible (halaal) activities and investments. All companies whose primary business involves forbidden (non-halaal) activities and investments will be excluded. Non-permissible activity may not be greater than 5% of total revenue. Forbidden products will include conventional financial services like banking and insurance, alcohol and tobacco, pork-related or non-halaal food production, gambling, pornography, and weapons and arms manufacturing.

• Financial Ratio Screening: companies are screened using financial ratios to look at their liquidity, interest income and debt. The ratios are aimed at determining how much of the company’s balance sheet is invested in non-permissible activity and are set out by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) board. In order for a company to be Shari’ah compliant, the ratio of total debt to total assets has to be less than 30%; cash and interest-bearing assets need to be less than 30% of total assets and accounts receivable and cash need to be less than 70% of total assets.

Since it is possible to invest in businesses that have less than 5% of their earnings gained from non-permissible activity, it is important that all funds have a structured process in place to extrapolate the non-permissible income (NPI). This is known as “dividend-purification” as NPI is removed from dividends and normally distributed to charity.

Fixed Interest

Shari’ah funds are not allowed to invest in conventional fixed-interest and money market instruments. The fixed-interest type portion of Multi-Asset Shari’ah funds are therefore invested in instruments known as sukuk. Sukuk is an Arabic word which directly translates into “certificate of ownership”. There are various types of sukuk, but South African funds typically comprise primarily Murabaha sukuk. Murabaha sukuk, in simple terms, constitutes participation in the ownership of a company and represents ownership of an underlying asset. The instrument is backed by an underlying asset and involves a transaction where the cost and profit of the tangible asset is ascertained and disclosed upfront. Sukuk owners have the right to profits but will also be affected by losses. Maturity of sukuk will typically correspond to an underlying asset or project.


SHARI’AH INVESTING

Differences in traditional funds and Shari’ah funds

Factor Conventional Shari’ah Difference

Fixed Income Bonds, Money Market, Other fixed interest instruments Sukuk Returns are less volatile. In SA this is limited to short-dated

duration and no exchange.

Equity Exposure All sectors Filtered sectorsSA Shari’ah funds will normally be overweight in resources and have no financials exposure. Offshore Shari’ah funds may have a wider universe.

Shari’ah Board n/a Islamic Scholars Add compliance oversight

Fund Audit n/a Quarterly Increased level of governance.

After conducting an extensive due diligence on the asset managers that offer Shari’ah funds in South Africa we have identified five managers that we believe follow a sound process and philosophy in terms of their portfolio management, and who also have the correct structures and methodology in place to offer Shari’ah compliant funds.

27four Investment Managers

• 27four Shari’ah Balanced Fund of Funds (Regulation 28 compliant)

27four is a multi-manager that offers the 27four Shari’ah Balanced Fund of Funds and has recently launched an equity Shari’ah compliant fund that is managed by Mazi Capital. 27four has been managing their Shari’ah balanced fund for institutional clients for a number of years.

Kagiso Asset Management

• Kagiso Islamic Equity Fund• Kagiso Islamic Balanced Fund (Regulation 28 compliant)

Kagiso has been managing Shari’ah investments since 2009 when they launched the Kagiso Islamic Equity fund. In May 2011 they also launched the Regulation 28 compliant Islamic balanced fund. In addition to aiming for consistent superior returns based on their philosophy and process, they aim to deliver a high level of integrity in their Shari’ah offering.

Element Investment Managers

• Element Islamic Equity Fund• Element Islamic Balanced Fund (Regulation 28 compliant)• Element Islamic Global Equity Fund

Element Investment Managers’ Shari’ah offering is founded on a structured process. Before launching their own Shari’ah fund they managed Old Mutual’s Shari’ah offering before it was taken in-house, and they also managed the Symmetry Shari’ah Balanced fund from 2005 - 2010. During October 2012 Element launched a retail Shari’ah Global Equity General Fund, the Element Islamic Global Equity Fund. In addition to having an independent Shari’ah Advisory Board, the manager has an internal Shari’ah department.

Old Mutual Asset Managers

• Old Mutual Albaraka Equity Fund• Old Mutual Albaraka Balanced Fund (Regulation 28 compliant)

The Old Mutual Shari’ah funds are managed by Old Mutual’s Quantitative Investment boutique. The equity fund was established 20 years ago and broke new ground with regard to Shari’ah investing in South Africa. A core differentiator in these funds is that they follow a purely quantitative active investment process.

STANLIB Asset Management

• STANLIB Shari’ah Equity Fund

The STANLIB Shari’ah Equity Fund was launched in September 2007. The fund is managed with the intention to maximise long term capital returns while reducing downside risk and remaining Shari’ah compliant at all times. STANLIB’s head of research, Henry Munzara and Suhail Mohamed (who is also responsible for internal Shari’ah compliance) co-manage the fund.


SHARI’AH-COMPLIANT MULTI ASSET FUND RANGE

Shari'ah-Compliant Multi Asset fund range

Funds:

27four Shari'ah Balanced FoFElement Islamic Balanced FundKagiso Islamic Balanced FundOld Mutual Albaraka Balanced FundSTANLIB MM Shari'ah Balanced FoF

Risk-Reward: 3 Years Annualised

Time Period: 01/10/2013 to 30/09/2016

Std Dev

0.0 3.0 6.0 9.0 12.0 15.0

-20.0

-10.0

0.0

10.0

20.0

30.0

27four Shari'ah Balan. Prescient FoF A1 Element Islamic Balanced A Kagiso Islamic Balanced A

Old Mutual Albaraka Balanced A STANLIB MM Shari'ah Balanced FoF B1

Re

turn

Quartile Ranking

As of Date: 30/09/2016

Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile

-10.0

-5.0

0.0

5.0

10.0

YTD 1 year 3 years

15.0

20.0

25.0



Re

turn

Returns

As of Date: 30/09/2016 Source Data: Total Return

YTD 1 year 3 years27four Shari'ah Balan. Prescient FoF A1Element Islamic Balanced AKagiso Islamic Balanced AOld Mutual Albaraka Balanced ASTANLIB MM Shari'ah Balanced FoF B1

2.6111.749.774.387.18

7.8315.4012.9710.5012.13

7.674.526.058.76

Risk Statistics

Time Period: 01/04/2015 to 30/09/2016

Std DevMax

Drawdown(monthly)

UpPeriod

Percent

DownPeriod

Percent

SharpeRatio

27four Shari'ah Balan. Prescient FoF A1

Element Islamic Balanced A

Kagiso Islamic Balanced A

Old Mutual Albaraka Balanced A

STANLIB MM Shari'ah Balanced FoF B1

5.68

8.93

8.79

7.19

7.86

-2.37

-8.59

-7.49

-1.89

-4.84

61.11

50.00

50.00

50.00

55.56

38.89

50.00

50.00

50.00

44.44

-0.18

-0.22

-0.17

-0.08

-0.16

Maximum Drawdown: Monthly

Time Period: 01/04/2015 to 30/09/2016

06/2015 09/2015 12/2015 03/2016 06/2016 09/2016-9.0

-8.0

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0



Rolling 3 Year Returns

Time Period: 01/10/2013 to 30/09/2016

Rolling Window: 1 Year 1 Month shift

10 11 12

2015

01 02 03 04 05 06 07 08 09 10 11 12

2016

01 02 03 04 05 06 07 08 09

-10.0

0.0

10.0

20.0



Re

turn


27FOUR SHARI’AH BALANCED FOF

27four Shari'ah Balanced FoF

Drawdown - Daily

Time Period: 01/06/2011 to 30/09/2016

2011 2012 2013 2014 2015 2016-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

27four Shari'ah Balan. Prescient FoF A1 (ASISA) South African MA High Equity

27four Shari'ah Balan. Prescient FoF A1 - Risk

Time Period: 01/10/2015 to 30/09/2016

Return

Std Dev

Max Drawdown

Tracking Error

Alpha

Beta

Sharpe Ratio 0.14

-2.37

5.75

7.83

0.86

0.65

3.95

27four Shari'ah Balan. Prescient FoF A1 - Asset Allocation

Portfolio Date: 30/09/2016

%

Stock 57.5

Bond 15.4

Cash 26.8

Other 0.3

Total 100.0

27four Shari'ah Balan. Prescient FoF A1 - Monthly Returns

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year

2016

2015

2014

2013

2012

2011

-2.15 1.10 1.20 1.69 1.06 -2.37 1.42 1.48 -0.75

0.74 3.07 -0.65 2.16 -0.34 -1.29 2.47 -0.49 -1.38 3.51 0.47 1.05

-0.17 1.80 1.10 1.28 1.05 1.50 1.26 0.05 -0.20 -1.20 -0.03 0.83

1.68 -0.52 0.89 -1.81 5.57 -2.69 2.91 2.06 2.38 2.27 -0.20 1.22

2.12 1.03 -0.21 0.79 -1.23 0.16 1.18 1.04 1.30 1.89 0.83 1.59

-1.06 -0.92 -0.91 -0.50 4.03 -0.23 -0.51

9.56

7.46

14.36

10.95

0.06

Portfolio Manager: 27four Investment ManagersFund Category: SA Multi Asset High EquityBenchmark: SA Multi Asset High Equity averageLaunch Date: May 2011Fund Size: R181 millionTIC: 1.76%

Objective: To diversify across asset classes for long term capital growth through a balanced approach. The manager in selecting collective investment schemes for the portfolio will seek to follow an investment policy which will secure for investors a combination of investments in equity, bond (sukuks), money and property markets. All collective investment schemes and assets will have been approved by the Shari’ah Supervisory Board for time to time. The portfolio will predominately invest in South African markets, but is however permitted to include investments in offshore jurisdictions subject to the investment conditions determined by the Registrar from time to time. The portfolio will be subject to the Prudential Investment Guidelines for South African Retirement Funds, being Regulation 28 of the Pension Funds Act, or such other Legislation published from time to time.

27Four Investment Managers has been successfully managing a suite of multi-manager Shari’ah compliant balanced investment portfolios for institutional clients for a number of years and in May 2011 launched a retail version of the fund. They have also recently launched a Shari’ah Equity Fund in partnership with Visio Capital. 27Four has a profound understanding of investments within the Shari’ah spectrum both within South Africa and abroad. This expertise together with their focus of choosing the best underlying asset managers means that they endeavour to create a robust and sound balanced fund. They believe that asset allocation is the main driver of long term outperformance and this is the first step in the multi-manager process. When evaluating asset managers for their Shari’ah Balanced Fund they look at 3 key factors – process and philosophy, operations and also whether the manager complies with Shari’ah Law. The next step is to construct the portfolio – for the Shari’ah Balanced fund this means finding an optimal balance and diversification between asset class, investment style, asset manager – and making sure that they keep within the risk budget. The Shari’ah Balanced fund complies with Regulation 28 and is therefore appropriate for retirement money. Even though it is not mandatory for a multi-manager, they have an independent Shar’iah Supervisory Board. The equity portion of this fund is invested with underlying asset managers and the offshore component invested with a foreign multi-manager. The fixed interest portion is invested in sukuk. In contrast to single asset managers this fund offers you the diversification benefits not only through the different asset classes, but also additional diversification through different asset managers.

Investment Growth - Daily

Time Period: 10/05/2011 to 30/09/2016

2011 2012 2013 2014 2015 201690.0

100.0

110.0

120.0

130.0

140.0

150.0

160.0

170.0

180.0

27four Shari'ah Balan. Prescient FoF A1 155.3 (ASISA) South African MA High Equity 174.1

Source: Morningstar Direct


ELEMENT ISLAMIC BALANCED FUND

Element Islamic Balanced

Drawdown

Time Period: 01/05/2010 to 30/09/2016

2010 2011 2012 2013 2014 2015 2016-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

Element Islamic Balanced A (ASISA) South African MA High Equity

Element Islamic Balanced A - Risk

Time Period: 01/10/2015 to 30/09/2016

Inv Bmk1

Return

Std Dev

Max Drawdown

Tracking Error

Alpha

Beta

Sharpe Ratio

15.40

9.00

-3.58

0.87

8.18

7.92

0.62

6.75

7.71

-3.29

0.00

0.00

1.00

-0.01

Element Islamic Balanced A - Monthly Returns


2016

2015

2014

2013

2012

-0.34 4.88 0.32 2.42 0.78 -0.85 4.36 0.41 -0.62

0.18 1.23 -3.11 1.90 -0.85 -3.21 -1.54 -0.78 -2.49 4.97 -3.58 2.04

2.84 1.18 0.20 1.35 0.34 1.58 1.59 -0.02 -2.08 -3.37 1.24 0.95

3.90 -1.92 0.35 -3.04 5.38 -5.13 3.00 2.43 1.30 3.50 -2.14 0.89

2.23 0.66 -0.72 0.50 -0.50 -0.84 1.37 0.50 1.49 2.32 0.08 0.15

-5.48

5.79

8.27

7.41

7.12

Element Islamic Balanced A - Asset Allocation


%

Stock 69.8

Bond 3.5

Cash 19.8

Other 6.9

Total 100.0

Portfolio Manager: Shamier KhanFund Category: SA Multi Asset High EquityBenchmark: SA Multi Asset High Equity AverageLaunch Date: April 2010Fund Size: R86 millionTIC: 2.45%

Objective: of the Element Islamic Balanced Fund will be to preserve capital with a reasonable level of income that is healing (permissible) for investors. The manager aims to do this by investing in an actively managed balanced portfolio, with an equity exposure (including international equity) between 0% and 75% at all times. The portfolio will be subject to the Prudential Guidelines for South African retirement funds being Regulation 28 of the Pension Fund Act or such other legislation published from time to time. The investment policy will focus on achieving this by investing in a wide variety of asset classes such as equity securities, non-equity securities, listed property, money market instruments and assets in liquid form, both domestically and internationally, that have been approved for investment by the Shari'ah Supervisory Board (SSB) from time to time.

Element has a long history and experience in the management of Shari’ah funds starting from 2000 when they managed the Old Mutual’s Islamic equity offering until the fund was taken in-house in 2005.They also managed the Symmetry Shar’iah Balanced fund from 2005 until 2010. Both the Shari’ah Equity and Balanced funds are managed in accordance to Element’s contrarian process and philosophy but with a Shari’ah overlay. The Element equity process is fundamentally a bottom up one that seeks to identify gaps between share price and intrinsic value. There are three key factors which they focus on during their management process. Firstly they look at value with the aim to identify stocks that will deliver a superior long term return; secondly, how much exposure they would like have to the stock in the portfolio; lastly they will also take into account the well-being of stakeholders. In addition to this Element also takes into account environmental, social and governance (ESG) principles when they evaluate shares. The social responsible component that filters through to the management of all their funds sets them apart from many peers within the retail space. The Shari’ah process comprises of qualitative screening to look at the nature of the business followed by financial screening to ensure that the business complies with limitations set out by the AAOIFI board. Element have been full AAOIFI members since 2007. The Non-Permissible Income (NPI) portion the fund is extracted on the receipt of dividends and does not enter the fund. The asset allocation process is a combination of top-down and bottom analysis; however the significance of each analysis will be dependent on the sector and share. A key differentiator of this fund relative to the other Shari'ah asset allocation funds is that they have exposure to property. The fixed interest portion is done via sukuk. The asset allocation split of the Shari’ah Balanced fund will be similar to the traditional Element Balanced fund. The foreign exposure in the fund is obtained through the Element Islamic Equity fund (limited to 20%) while the remaining foreign exposure is through foreign sukuk. In their foreign process Element has partnered with Credit Suisse Holt and Ideal Rating to screen global companies to identify attractive Shari’ah compliant stocks. The fund comprises of the top 50 stocks based on the screening and Element’s fundamental preferences.

Investment Growth

Time Period: 29/04/2010 to 30/09/2016

2010 2011 2012 2013 2014 2015 201680.0

100.0

120.0

140.0

160.0

180.0

200.0

Element Islamic Balanced A 135.4 (ASISA) South African MA High Equity 187.7



KAGISO ISLAMIC BALANCED FUND

Kagiso Islamic Balanced

Drawdown - Daily

Time Period: 01/06/2011 to 30/09/2016

2011 2012 2013 2014 2015 2016-8.0

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

Kagiso Islamic Balanced A (ASISA) South African MA High Equity

Kagiso Islamic Balanced A - Risk

Time Period: 01/10/2015 to 30/09/2016

Return

Std Dev

Max Drawdown

Tracking Error

Alpha

Beta

Sharpe Ratio 0.63

-4.50

9.11

12.97

4.73

5.81

1.01

Kagiso Islamic Balanced A - Monthly Returns


2016

2015

2014

2013

2012

2011

-3.01 4.57 3.28 2.12 1.85 -2.49 2.36 2.12 -1.15

-1.56 3.22 -2.60 3.34 -1.08 -2.22 -0.86 -1.38 -2.00 4.51 -1.69 0.17

2.22 0.80 0.89 1.73 0.78 1.34 1.31 0.48 -1.47 -2.30 1.11 0.57

3.96 -0.87 1.10 -2.63 8.24 -5.42 4.31 3.85 1.46 1.22 -0.18 2.43

2.11 1.70 -1.47 0.50 -2.08 0.89 0.34 2.61 2.19 1.51 0.76 0.21

-1.92 -0.98 -0.51 -1.51 2.42 1.61 -0.94

-2.45

7.63

18.13

9.54

6.67

Kagiso Islamic Balanced A - Asset Allocation


%

Stock 55.9

Bond 0.0

Cash 42.8

Other 1.3

Total 100.0

Portfolio Manager: Abdulazeez DavidsFund Category: SA Multi Asset High EquityBenchmark: SA Multi Asset High Equity AverageLaunch Date: 03 May 2011Fund Size: R454 millionTIC: 1.63%

Objective: To provide steady long term returns and capital growth over the long term and a total portfolio return that is better than the average domestic – asset allocation – prudential – variableequity funds category. The portfolio has a moderate level of risk and therefore seeks to provide a moderated exposure to volatility over the short term. The Portfolio may invest in a wide variety of asset classes such as listed shares, sukuks, and listed property, both domestically and internationally subject to Shari’ah compliance. The portfolio may invest offshore to the maximum extent permitted by the Association for Savings and Investments South Africa (ASISA) domestic funds category. The portfolio may include participatory interests or any other form of participation in portfolios of collective investment schemes or other similar schemes only where the scheme has been approved in South Africa. The portfolio is Regulation 28 compliant.

Kagiso has been managing Shari’ah investments since 2009 with the launched the Kagiso Islamic Equity fund. In May 2011 they also launched a regulation 28 compliant Islamic Balanced fund. Kagiso’s house process and philosophy is applied to both funds, with an added Shari’ah compliance overlay. The valuation process is built on a combination of original, in-depth fundamental analysis and a multi-factor quantitative screening process. After an initial screening, approximately 100 shares are assessed. The first assessment summarizes the investment case, provides an estimation of cash-flows and an estimated valuation. The initial 100 shares are then reduced to about 66 which then undergo rigorous fundamental analysis which includes a meeting with management and an analysis of the company’s annual report. These reports also remain cognisant of current news-flow and ultimately look to produce investment ideas which will reflect in the equity portfolios. On the foreign equity side the process includes equity screening using Bloomberg and less detailed fundamental analysis. The results of fundamental analysis are then assessed along with a multi-factor screening tool which gauges the attractiveness of a share based on pre-determined factors. A ranking table is then generated. Over and above the Kagiso process there are additional filters implemented, namely: an industry screen, financial screens and additional screening for companies highlighted for inclusion. The industry screen removes stocks that would be deemed non-compliant accordance to Shari’ah law. The financial screens would ensure that those counters that passed through the industry screening also meet a series of financial criteria. Lastly the additional screening is simply an extra check to ensure that shares selected do indeed meet Shari’ah criteria. The asset allocation of the Islamic balanced fund will typically mirror that of the normal Kagiso Balanced Fund as the process and view taken will be the similar. The Balanced fund holds a combination of local and foreign equity and sukuk (Islamic bonds) and has a proposed strategic asset allocation of 55% to local equities, 20% local sukuk, 20% foreign equity and 5% foreign cash and sukuk. The funds are monitored by an internal Shari’ah advisory board.Non-permissible income is extrapolated in a seamless process as soon as dividends enter their accounts and are distributed to charities.


Time Period: 05/05/2011 to 30/09/2016

2011 2012 2013 2014 2015 201690.0

100.0

110.0

120.0

130.0

140.0

150.0

160.0

170.0

180.0

Kagiso Islamic Balanced A 146.3 (ASISA) South African MA High Equity 173.1



OLD MUTUAL ALBARAKA BALANCED FUND

Old Mutual Albaraka Balanced

Drawdown - Daily

Time Period: 01/12/2010 to 30/09/2016

2011 2012 2013 2014 2015 2016-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

Old Mutual Albaraka Balanced A (ASISA) South African MA Medium Equity

Old Mutual Albaraka Balanced A - Risk

Time Period: 01/10/2011 to 30/09/2016

Calculation Benchmark: (ASISA) South African MA High Equity

Return

Std Dev

Downside Deviation

Alpha

Beta

R2

Sharpe Ratio (arith)

Tracking Error

10.81

5.91

0.81

2.52

0.23

0.80

65.30

3.70

Old Mutual Albaraka Balanced A - Monthly Returns


2016

2015

2014

2013

2012

2011

-1.89 5.04 0.28 -0.07 2.41 -1.62 1.19 0.77 -1.61

2.16 2.46 -0.50 0.94 -1.22 -0.51 1.04 -0.42 -0.56 5.14 -1.28 2.00

0.56 1.32 0.59 1.16 0.41 1.22 0.34 -0.50 0.89 -0.18 0.50 1.13

0.70 -1.23 1.92 -2.09 6.00 -2.18 2.84 2.44 1.62 2.01 0.66 1.85

2.32 1.10 -0.20 1.00 -0.65 -0.21 1.91 1.14 1.02 1.53 1.07 1.71

-1.74 1.10 0.23 1.01 -0.62 -0.60 0.49 -0.34 -2.62 4.87 -0.33 0.37

9.45

7.69

15.22

12.33

1.65

1.66

Old Mutual Albaraka Balanced A - Asset Allocation


%

Stock 59.0

Bond 7.6

Cash 33.3

Other 0.0

Total 100.0

Portfolio Manager: Saliegh Salaam & Grant WatsonFund Category: SA Multi Asset Medium EquityBenchmark: Composite of 45% SA Shari'ah Equity Index,10% S&P Developed Markets Large & Mid Cap Shari'ah Index, 40% SteFi - 0.5% & 5% 3 month US LiborLaunch Date: 12 November 2010Fund Size: R1400 millionTIC: 1.64%

Objective: To seek steady long term capital growth with a moderate level of income to the investor, through a diversified asset class exposure of Equity and Non-Equity securities. Investments will consist of equities listed on South African as well as other exchanges, assets in liquid form, non-equity securities and participatory interests in other portfolios of schemes registered in the RSA or of participatory or of any other form of participation in portfolios of collective investment scheme in securities of other similar schemes permitted by the Shari’ah Standards of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The Investments of the portfolio will comply with Prudential Investment Guidelines as contained in the Pension Fund Act. The Manager may invest in financial instruments in accordance with the manner, limits and conditions as determined by CISCA and the Shari’ah Standards of the AAOIFI. The portfolio is Regulation 28 compliant.

Old Mutual’s Quantitative Investments boutique has been involved in the Old Mutual Albaraka offering since 2005. Both the balanced and equity fund is managed according to a team based approach. Old Mutual manages these funds in partnership with Albaraka Bank and Channel Islam who provide distribution, branding and Shariah compliance support. Quantitative Investments looks to create long term wealth by focussing on building superior portfolios. The focus of the research process is at the portfolio creation level (as opposed to stock picking), and they follow a strong quantitative process which looks at equities and risk on an objective basis. The fund is managed using a strategy they call “Managed Volatility” which looks to systematically manage the volatility of the portfolio to generate a smooth return profile without sacrificing returns in the long term. To do this they use an in-house minimum variance optimisation method. The process looks to take advantage of mispricing of risk as well as value and momentum factors. The fund has a three tiered compliance process to ensure that the fund is managed to their mandate and to Shariah law. Audits are done by Albaraka bank, an external auditor and the Shariah advisory board. In addition to the audit function the Shariah board also provides frequent guidance to the management team in terms of which investments would be deemed permissible. The non-permissible income in the funds is removed on a daily basis. The non-permissible income is distributed to charities and a charitable trust. The asset allocation is driven by their proprietary quantitative asset allocation model. The model looks at the relative value of equity compared to cash when determining the asset allocation. The greater the dividend yield relative cash yields the larger the allocation to equity, and vice versa. The local equity component mirrors that of the Old Mutual Albaraka Equity Fund and will typically comprise of 32.5% to 40% of the portfolio. The overall equity allocation in the fund is now limited to 60% as the fund has recently moved to the Multi Asset Medium Equity category. The international portion, comprising only of equity currently, was recently increased to 20% and is invested directly in global developed market stocks across the US, Europe and Asia. The international equity exposure is measured against a global Shari’ah index and is managed using a similar approach to the local component. The cash portion is fixed at 2% and is invested in a Shariah compliant savings account. The Shariah advisory board for these funds have advised against the use of Sukuk and as an alternative the team has opted to include equity/commodity conduits. These are promissory notes which are issued by a rated and approved Islamic or investment bank. The portion of these assets included in the fund range between 33-43%. The fund may not hold any local property.


Time Period: 13/11/2010 to 30/09/2016

2011 2012 2013 2014 2015 201690.0

100.0

110.0

120.0

130.0

140.0

150.0

160.0

170.0

180.0

Old Mutual Albaraka Balanced A 163.2 (ASISA) South African MA Medium Equity 171.6


SHARI ’AH BOOKLET BY GLACIER RESEARCH - Q3 - NOVEMBER 2016 1 1

STANLIB MM SHARI’AH BALANCED FOF

STANLIB MM Shari'ah Balanced FoF

Drawdown

Time Period: 01/10/2011 to 30/09/2016

2011 2012 2013 2014 2015 2016-40.0

-35.0

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

STANLIB MM Shari'ah Balanced FoF A FTSE/JSE Shariah All Share PR ZAR

STANLIB MM Shari'ah Balanced FoF A - Risk

Time Period: 01/10/2015 to 30/09/2016

Calculation Benchmark: (ASISA) South African MA High Equity

Inv Bmk1

Return

Std Dev

Downside Deviation

Alpha

Beta

R2


Tracking Error

6.75

7.71

0.00

0.00

0.47

8.74

11.23

2.04

5.13

4.21

0.92

66.16

0.00

1.00

100.00

-0.05

STANLIB MM Shari'ah Balanced FoF A - Asset Allocation


%

Stock 62.1

Bond 1.9

Cash 35.8

Other 0.3

Total 100.0

STANLIB MM Shari'ah Balanced FoF A - Monthly Returns


2016

2015

2014

2013

2012

2011

-2.54 4.99 1.75 0.97 1.89 -2.09 1.78 1.28 -1.45

1.68 -1.30 -1.71 0.12 -1.00 -1.36 5.10 -1.71 1.08

3.39

Portfolio Manager: Naweed Hoosenmia & Suhail MohamedFund Category: SA Multi-Asset High EquityBenchmark: Shari'ah ALSI 45%; STeFI (less 0.5%) 35%; Dow Jones Islamic World Index (ZAR) 15%; 3 MOnths USD LIBOR 5%Launch Date: 25 March 2015Fund Size: R128 millionTIC: 2.61%

Objective: This a mutli-asset class (including foreign) Shari'ah complaint fund that aims to outperform the Shari'ah balanced fund peer group average, at risk levels consistent with peers in the category but lower than equity funds. The fund is diversified across asset classes, sectors and asset managers and aims to provide long-term growth of capital and income. This multi-manages fund of fund is designed to deliver superior investment returns consistently than deliver it through a single manager or mandate. This fund is suitable for investors who wish to invest in a Shari'ah compliant multi-asset solution, where they outsource asset allocation decision, and diversify single manager risk. This investment should be considered for long-term investments rather than short-term, and is aimed at investors with an investment horizon of at least five years.

The STANLIB Multi-Manager Shari’ah Balanced Fund of Funds (FoF) invests in other collective investment schemes (CISs) and therefore follows an approach that outsources the fund management. The fund is co-managed by Naweed Hoosenmia (BSc (Hons)) and Suhail Mohamed (BCom (Hons), MA (Islamic Finance), Hifzul Quraan). Suhail Mohamed also co-manages the Sharia’h Equity Fund with Henry Munzara. Mohamed is a specialist in Shari’ah-compliance and Shari’ah product development. The STANLIB Multi-Manager investment team is led by Chief Investment Officer Joao Frasco and manages mandates in excess of R150 billion. The underlying funds are Kagiso Islamic Balanced Fund (50%), Old Mutual Albaraka Balanced Fund (40%) and Old Mutual Albaraka Equity Fund (10%). The Kagiso Islamic Balanced Fund is managed by Abdulazeez Davids of Kagiso and both the Old Mutual Albaraka Balanced and Old Mutual Albaraka Equity funds are managed by Saliegh Salaam of Old Mutual’s Quantitative Investments boutique.

STANLIB Multi-Manager Investment team’s process includes ongoing due diligence of managers and construction of portfolios for different mandates overtime. They follow a rigorous and disciplined manager research and selection process which begins with the analysis of the sector for which the portfolio is being built, and determining the key drivers of outperformance in that sector. The manager research team conducts thorough quantitative and qualitative analyses through extensive investment due diligence to identify managers that have the skill and ability to outperform. This results in the production of high conviction buy/hold/ sell lists, as well as mandate performance expectations under different environments, defining events and sell triggers/disciplines. The portfolio management team then constructs a framework for blending the highest quality managers into the portfolio that targets the key areas of outperformance and promotes diversification. The selected portfolio managers provide exposure to sources of market outperformance over the long term. Passive alternative are considered in the process and where used, they lower the portfolio costs. On a regular basis the portfolio is reviewed to ensure it is delivering on its long term objectives and from time to time changes are made to improve the structure and or risk return profile.

As this is a FoF, a relatively higher fee structure may result dues to each underlying CIS levying their own charges. The fund may invest in foreign securities and as a result, will be exposed to macroeconomic, political, tax, settlement and liquidity risks factors that may be different to similar investments in the South African market. Fluctuations or movements in exchange rates will therefore also affect the overall value of the fund.

Rolling Returns

Time Period: 01/10/2013 to 30/09/2016


10 11 12

2015

01 02 03 04 05 06 07 08 09 10 11 12

2016

01 02 03 04 05 06 07 08 090.0

5.0

10.0

15.0

STANLIB MM Shari'ah Balanced FoF A (ASISA) South African MA High Equity

Retu

rn



SHARI’AH-COMPLIANT EQUITY FUND RANGE

Shari'ah-Compliant Equity fund range

Funds:

Element Islamic Equity FundKagiso Islamic Equity FundOld Mutual Albaraka Equity FundSTANLIB Shari'ah Equity Funds27four Shari'ah Active Equity Prescient Fund


Time Period: 01/10/2013 to 30/09/2016

Std Dev

0.0 5.0 10.0 15.0 20.0 25.0 30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Element Islamic Equity A Kagiso Islamic Equity A Old Mutual Albaraka Equity A

STANLIB Shari'ah Equity A 27four Shari'ah Active Eq. Prescient A1 FTSE/JSE Shariah All Share PR ZAR

Re

turn

Quartile Ranking

As of Date: 30/09/2016


-10.0

0.0

10.0

20.0

30.0

YTD 1 year 3 years 5 years

40.050.0

60.0

70.0

80.0

90.0



Re

turn

Returns


YTD 1 year 3 years 5 yearsElement Islamic Equity AKagiso Islamic Equity AOld Mutual Albaraka Equity ASTANLIB Shari'ah Equity A27four Shari'ah Active Eq. Prescient A1

14.8916.035.477.544.71

17.9618.2712.853.869.55

1.646.059.16

-0.3012.13

3.5810.2014.445.48

Risk Statistics

Time Period: 01/11/2010 to 30/09/2016

Std DevMax

Drawdown(monthly)

UpPeriod

Percent

DownPeriod

Percent

SharpeRatio

Element Islamic Equity A

Kagiso Islamic Equity A

Old Mutual Albaraka Equity A

STANLIB Shari'ah Equity A

27four Shari'ah Active Eq. Prescient A1

11.35

10.30

9.06

10.17

-23.38

-14.14

-6.28

-26.10

52.11

63.38

67.61

54.93

47.89

36.62

32.39

45.07

-0.25

0.34

0.79

-0.15


Time Period: 01/11/2010 to 30/09/2016

2011 2012 2013 2014 2015 2016-40.0

-35.0

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0




Time Period: 01/11/2010 to 30/09/2016


12

2012

03 06 09 12

2013

03 06 09 12

2014

03 06 09 12

2015

03 06 09 12

2016

03 06 09

-40.0

-20.0

0.0

20.0

40.0



Re

turn


ELEMENT ISLAMIC EQUITY FUND

Element Islamic Equity

Element Islamic Equity A - Risk

Time Period: 01/10/2011 to 30/09/2016

Inv Bmk1

Return

Std Dev

Max Drawdown

Tracking Error

Alpha

Beta

Sharpe Ratio

3.62

16.24

-36.89

0.00

0.00

1.00

-0.06-0.14

0.61

-1.02

9.14

-23.38

11.91

3.58

Drawdown

Time Period: 01/10/2011 to 30/09/2016

2011 2012 2013 2014 2015 2016-40.0

-35.0

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

Element Islamic Equity A FTSE/JSE Shariah All Share PR ZAR

Element Islamic Equity A - Asset Allocation


%

Stock 89.4

Bond 0.0

Cash 2.4

Other 8.2

Total 100.0

Element Islamic Equity A - Monthly Returns


2016

2015

2014

2013

2012

2011

-2.34 6.12 2.40 4.54 -2.02 -0.35 6.49 0.74 -1.14

-0.75 1.73 -5.35 3.49 -1.79 -4.26 -3.51 -1.26 -4.56 7.25 -6.28 2.15

3.67 1.28 1.05 2.04 0.64 1.86 2.28 -0.01 -4.33 -6.05 1.18 -0.35

4.52 -3.28 -0.13 -5.14 7.51 -7.73 4.70 3.49 1.48 5.11 -3.20 0.60

3.03 0.61 -2.03 -0.12 -2.05 -0.23 1.29 -0.56 1.99 2.22 -1.23 1.31

-2.43 1.44 0.87 2.76 -0.91 -1.99 -1.84 0.18 -2.13 4.97 -0.50 -0.09

-13.19

2.88

6.92

4.15

0.05

8.46

Portfolio Manager: Shamier KhanFund Category: SA Equity GeneralBenchmark: Average of Shari'ah General Equity funds with a 1 year track recordLaunch Date: February 2006Fund Size: R136 millionTIC: 2.41%

Objective: This is an actively managed domestic general equity portfolio, aiming to provide investors with Shari'ah compliant returns. It offers investors the opportunity to achieve long-term capital growth with moderate level of income. This is done by investing in a portfolio of listed equities that have been approved by the Shari'ah Supervisory Board in accordance with Islamic Principles.

Element has a long history and experience in the management of Shari’ah funds starting from 2000 when they managed the Old Mutual’s Islamic equity offering until the fund was taken in-house in 2005. They also managed the Symmetry Shar’iah Balanced fund from 2005 until 2010. Both the Shari’ah Equity and Balanced funds are managed in accordance to Element’s contrarian process and philosophy but with a Shari’ah overlay. The Element equity process is fundamentally a bottom up one that seeks to identify gaps between share price and intrinsic value. There are three key factors which they focus on during their management process. Firstly they look at value with the aim to identify stocks that will deliver a superior long term return; secondly, how much exposure they would like have to the stock in the portfolio; lastly they will also take into account the well-being of stakeholders. In addition to this Element also takes into account environmental, social and governance (ESG) principles when they evaluate shares. The social responsible component that filters through to the management of all their funds sets them apart from many peers within the retail space. The Shari’ah process comprises of qualitative screening that looks at the nature of the business followed by financial screening to ensure that the business complies with limitations set out by the AAOIFI board. The Non-Permissible Income (NPI) portion the fund is extracted on the receipt of dividends and does not enter the fund.

Rolling Returns

Time Period: 01/10/2011 to 30/09/2016


10 11 12

2013

01 02 03 04 05 06 07 08 09 10 11 12

2014

01 02 03 04 05 06 07 08 09 10 11 12

2015

01 02 03 04 05 06 07 08 09 10 11 12

2016

01 02 03 04 05 06 07 08 09

-40.0

-20.0

0.0

20.0

40.0

Element Islamic Equity A FTSE/JSE Shariah All Share PR ZAR

Retu

rn



KAGISO ISLAMIC EQUITY FUND

Kagiso Islamic Equity

Kagiso Islamic Equity A - Risk

Time Period: 01/11/2010 to 30/09/2016

Inv Bmk1

Return

Std Dev

Max Drawdown

Tracking Error

Alpha

Beta

Sharpe Ratio

2.04

15.70

-36.89

0.00

0.00

1.00

-0.160.36

0.57

5.24

8.44

-14.14

10.30

9.44

Drawdown

Time Period: 01/11/2010 to 30/09/2016

2011 2012 2013 2014 2015 2016-40.0

-35.0

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

Kagiso Islamic Equity A FTSE/JSE Shariah All Share PR ZAR

Kagiso Islamic Equity A - Asset Allocation


%

Stock 85.8

Bond 0.0

Cash 11.5

Other 2.7

Total 100.0

Kagiso Islamic Equity A - Monthly Returns


2016

2015

2014

2013

2012

2011

-3.77 7.34 4.60 3.79 1.08 -2.71 3.44 3.52 -1.74

-1.42 3.68 -3.74 4.63 -1.51 -3.64 -1.64 -0.89 -4.59 5.67 -3.97 0.45

2.66 1.62 1.04 1.94 0.47 1.36 1.34 0.10 -2.11 -2.59 0.76 0.26

5.33 -0.87 0.30 -3.37 8.08 -4.92 4.94 4.64 1.95 1.92 -0.71 2.54

3.49 1.68 -1.97 1.15 -4.39 1.27 -0.19 2.01 2.67 2.24 0.06 2.74

-1.15 2.06 1.46 0.96 0.11 -1.64 -0.66 -0.47 -2.90 4.56 2.15 -1.25

-7.38

6.96

20.79

11.00

3.04

11.37

Portfolio Manager: Abdulazeez DavidsFund Category: SA Equity GeneralBenchmark: SA Equity General averageLaunch Date: 13 July 2009Fund Size: R570 millionTIC: 1.58%

Objective: To provide steady capital growth and a total portfolio return that is better than the average general equity fund. The generation of income is of secondary importance. Investment Policy: In order to achieve these objectives the portfolio will employ a fundamental, bottom-up stock picking strategy, coupled with a proprietary multifactor investment model and process. The portfolio will generally be fully invested in a diversified portfolio of equity securities, have a minimum equity exposure of 75% and will not invest offshore. The portfolio will not invest in any interest bearing instruments. The portfolio's main bank account is with ABSA bank, making use of ABSA's Islamic banking services which cater specifically to Shari'ah Fund compliance. The portfolio may also include participatory interests or any other form of participation in portfolios of collective investment schemes or other similar schemes only where the scheme's initial registration is in South Africa.

Kagiso has been managing Shari’ah investments since 2009 when they launched the Kagiso Islamic Equity fund. In May 2011 they also launched a regulation 28 compliant Islamic Balanced fund. Kagiso’s house process and philosophy is applied to both funds, with an added Shari’ah compliance overlay. The valuation process is built on a combination of original, in-depth fundamental analysis and a multi-factor quantitative screening process.After an initial screening, approximately 100 shares are assessed. The first assessment summarizes the investment case, provides an estimation of cash-flows and an estimated valuation. The initial 100 shares are then reduced to about 66 which then undergo rigorous fundamental analysis which includes a meeting with management and an analysis of the company’s annual report. These reports also remain cognisant of current news-flow and ultimately look to produce investment ideas which will reflect in the equity portfolios. On the foreign equity side the process includes equity screening using Bloomberg and less detailed fundamental analysis. The results of fundamental analysis are then assessed along with a multi-factor screening tool whichgauges the attractiveness of a share based on pre-determined factors. A ranking table is then generated. Over and above the Kagiso process there are additional filters implemented, namely: an industry screen, financial screens and additional screening for companies highlighted for inclusion. The industry screen removes stocks that would be deemed non-compliant accordance to Shari’ah law. The financial screens would ensure that those counters that passed through the industry screening also meet a series of financial criteria. Lastly the additional screening is simply an extra check to ensure that shares selected do indeed meet Shari’ah criteria. The funds are monitored by an internal Shari’ah advisory board.Non-permissible income isextrapolated in a seamless process as soon as dividends enter their accounts and are distributed to charities.

Rolling Returns

Time Period: 01/11/2010 to 30/09/2016


12

2012

03 06 09 12

2013

03 06 09 12

2014

03 06 09 12

2015

03 06 09 12

2016

03 06 09

-40.0

-20.0

0.0

20.0

40.0

Kagiso Islamic Equity A FTSE/JSE Shariah All Share PR ZAR

Retu

rn



OLD MUTUAL ALBARAKA EQUITY

Old Mutual Albaraka Equity

Drawdown

Time Period: 01/10/2011 to 30/09/2016

2011 2012 2013 2014 2015 2016-40.0

-35.0

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

Old Mutual Albaraka Equity A FTSE/JSE Shariah All Share PR ZAR

Old Mutual Albaraka Equity A - Risk

Time Period: 01/10/2011 to 30/09/2016

Calculation Benchmark: FTSE/JSE Shariah All Share PR ZAR

Inv Bmk1

Return

Std Dev

Downside Deviation

Alpha

Beta

R2


Tracking Error

14.44

9.44

6.27

8.59

0.44

56.63

0.90

11.07

3.62

16.24

0.00

0.00

1.00

100.00

-0.15

0.00

Old Mutual Albaraka Equity A - Asset Allocation


%

Stock 97.8

Bond 0.0

Cash 2.2

Other 0.0

Total 100.0

Old Mutual Albaraka Equity A - Monthly Returns


2016

2015

2014

2013

2012

2011

-3.58 8.37 1.31 0.21 1.50 -1.55 2.40 -0.46 -2.40

3.33 3.70 -2.07 1.95 -2.73 -1.16 0.63 -1.64 -1.35 8.48 -3.28 1.97

-0.18 2.51 1.15 1.68 0.65 1.87 0.52 -1.16 0.69 0.03 0.34 0.76

1.47 -2.04 1.46 -3.34 8.67 -3.31 4.88 1.99 3.65 3.02 -0.04 2.10

4.04 1.80 0.99 1.56 -0.93 -0.29 3.01 2.33 1.57 3.07 2.02 1.79

-1.66 1.89 0.64 2.02 -0.54 -0.80 0.53 -0.35 -2.40 7.03 0.02 0.96

7.45

9.16

19.41

22.97

7.25

1.04

Portfolio Manager: Saliegh SalaamFund Category: SA Equity GeneralBenchmark: 85% Customised SA Shari'ah Equity Index; 15% S&P Developed Markets Large and Mid-Cap Shari'ah IndexLaunch Date: 01 June 1992Fund Size: R2 200 millionTIC: 2.00%

Objective: To achieve an investment medium for investors who, for moral, ethical, and/or religious reasons wish to exclude the sectors that invest in alcohol, tobacco, gambling, non-heal foodstuffs and fixed interest related securities. Previously known as the Southern Pure Specialist Fund.

The Old Mutual Albaraka Equity fund has been managed by Old Mutual’s Quantitative Investments boutique since 2005 (fund was launched in June 1992) as Old Mutual looked to bring the management of the fund in-house. The management of the fund follows a team based approach. Old Mutual manages these funds in partnership with Albaraka Bank and Channel Islam who provide distribution, branding and Shariah compliance support. Quantitative Investments looks to create long term wealth by focussing on building superior portfolios. The focus of the research process is at the portfolio creation level (as opposed to stock picking), and they follow a strong quantitative process which looks at equities and risk on an objective basis. The fund is managed using a strategy they call “Managed Volatility” which looks to systematically manage the volatility of the portfolio to generate a smooth return profile without sacrificing returns in the long-term. The manager also follows an absolute approach in managing their funds as they see losing money as key risk. To do this they use an in-house minimum variance optimisation method. The funds have a three tiered compliance process to ensure that the fund is managed to their mandate and to Shariah law. Audits are done by Albaraka bank, an external auditor and the Shariah advisory board. In addition to the audit function the Shariah board also provide frequent guidance to the management team in terms of which investments would be deemed permissible. The non-permissible income in the funds is removed on a daily basis. The non-permissible income is distributed to charities a...

Rolling Returns

Time Period: 01/10/2011 to 30/09/2016


10 11 12

2013

01 02 03 04 05 06 07 08 09 10 11 12

2014

01 02 03 04 05 06 07 08 09 10 11 12

2015

01 02 03 04 05 06 07 08 09 10 11 12

2016

01 02 03 04 05 06 07 08 09

-40.0

-20.0

0.0

20.0

40.0

Old Mutual Albaraka Equity A FTSE/JSE Shariah All Share PR ZAR

Retu

rn



STANLIB SHARI’AH EQUITY

STANLIB Shari'ah Equity

STANLIB Shari'ah Equity A - Risk

Time Period: 01/10/2011 to 30/09/2016

Inv Bmk1

Return

Std Dev

Max Drawdown

Tracking Error

Alpha

Beta

Sharpe Ratio

5.48

10.67

-26.10

7.85

0.66

0.60

0.01

3.62

16.24

-36.89

0.00

0.00

1.00

-0.06

Drawdown

Time Period: 01/10/2011 to 30/09/2016

2011 2012 2013 2014 2015 2016-40.0

-35.0

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

STANLIB Shari'ah Equity A FTSE/JSE Shariah All Share PR ZAR

STANLIB Shari'ah Equity A - Asset Allocation


%

Stock 95.5

Bond 0.0

Cash 4.5

Other 0.0

Total 100.0

STANLIB Shari'ah Equity A - Monthly Returns


2016

2015

2014

2013

2012

2011

-4.62 5.97 5.05 3.35 -1.08 -2.56 1.67 0.24 -0.23

-2.76 4.03 -2.45 4.99 -2.75 -1.83 -2.49 -4.01 -4.07 3.22 -5.61 -0.88

1.58 0.79 2.69 2.44 -0.86 1.29 4.31 -0.70 -1.76 -3.05 -2.97 -1.57

3.01 -2.58 0.08 -2.88 8.25 -5.79 3.79 2.49 2.29 3.59 -0.88 2.64

2.25 1.37 -1.06 1.69 -2.36 2.02 0.26 0.71 2.46 3.20 -0.44 2.89

-0.62 1.22 0.09 1.75 0.20 -1.41 -2.11 -2.15 -2.43 6.48 -0.27 0.92

-14.22

1.92

14.07

13.62

1.38

3.98

Portfolio Manager: Henry Munzara & Suhail MohamedFund Category: SA Equity GeneralBenchmark: FTSE/JSE Shari'ah All Share IndexLaunch Date: 01 September 2007Fund Size: R469 millionTIC: 1.91%

Objective: To primarily generate capital growth over the medium to long term, whilst conforming to the religious and cultural beliefs of Muslim investors. The generation of income will be a secondary objective. This portfolio will invest in a mix of predominantly South African equity securities, as well as foreign equity securities, and when appropriate, other securities such as non-equity securities as may be permitted by the Shari’ah Standards of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

The Stanlib Shari’ah Equity Fund has recently undergone a change in Portfolio Manager. The new manager is Henry Munzara (16 years asset management experience) who was appointed as the Stanlib Head of Research in September 2012. The Fund is managed within the Research team. Prior to this role, Henry co-managed the Stanlib Absolute Return Funds. The Sharia’h Equity Fund Manager is Suhail Mohamed who is a specialist in Shari’ah compliance and Shari’ah product development. The Shari’ah board have complete voting powers to what may or may not be included in the fund according to Shari’ah principles. As a starting point, the research team believe that markets are inefficient due to behavioural biases and therefore discrepancies exist between a company’s fundamental value and share price. A four pillar process has been adopted and aims to remove all emotional biases by performing objective analysis on companies. Focus is placed on operational performance through a business cycle so that current trends are not extrapolated and long term consistent performance is identified. The first pillar is economic moat and quality which aims to determine whether the company has any competitive advantage. The second pillar is stewardship which will indicate the track record of management, how capital has been allocated and economic, social and governance factors. These two pillars, together with economic inputs lead to the third pillar which is valuation. Discounted cash flow calculations are done to determine the fair value of the company and are used as a long term valuation measure. A 4 year internal rate of return is calculated as well, using forecasted earnings and a point-in-time multiple and is their short term valuation measure. Risk factors such as the operational risk of a business and margin of safety are used to arrive at a risk adjusted valuation. Financial ratio screening is performed and together Non-Shari’ah compliant sectors, stocks may be excluded from any recommendations to the board. The non-permissible income is stripped from the incoming payment before the balance is paid to the fund. This is placed in a separate account and distributed to charities bi-annually. The fund may have 15% offshore exposure. Their offshore exposure will consist of stocks within the Dow Jones Islamic Market Titans 100 index and the same research process used for local stocks will apply. The manager will consider having offshore exposure in a Shari’ah compliant index or ETF’s. The fund may also hold listed property stocks. Stanlib Shari’ah Equity fund management believe that their process, which removes emotional bias, caters as a differentiator amongst their peers. As well as, their risk managementview to hold regularly traded stocks.

Rolling Returns

Time Period: 01/10/2011 to 30/09/2016


10 11 12

2013

01 02 03 04 05 06 07 08 09 10 11 12

2014

01 02 03 04 05 06 07 08 09 10 11 12

2015

01 02 03 04 05 06 07 08 09 10 11 12

2016

01 02 03 04 05 06 07 08 09

-40.0

-20.0

0.0

20.0

40.0

STANLIB Shari'ah Equity A FTSE/JSE Shariah All Share PR ZAR

Retu

rn



27FOUR SHARI’AH ACTIVE EQUITY

27four Shari'ah Active Equity

Drawdown

Time Period: 01/10/2011 to 30/09/2016

2011 2012 2013 2014 2015 2016-40.0

-35.0

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

27four Shari'ah Active Eq. Prescient A1 FTSE/JSE Shariah All Share PR ZAR

27four Shari'ah Active Eq. Prescient A1 - Risk

Time Period: 01/10/2013 to 30/09/2016

Inv Bmk1

Return

Std Dev

Max Drawdown

Tracking Error

Alpha

Beta

Sharpe Ratio

-3.37

15.66

-36.89

0.00

0.00

1.00

-0.540.66

0.33

8.41

12.59

-4.99

8.55

12.13

27four Shari'ah Active Eq. Prescient A1 - Asset Allocation


%

Stock 80.1

Bond 0.0

Cash 19.9

Other 0.0

Total 100.0

27four Shari'ah Active Eq. Prescient A1 - Monthly Returns


2016

2015

2014

2013

2012

2011

-4.07 0.73 4.06 3.10 -2.01 -3.04 2.78 1.19 2.22

0.41 5.01 -1.82 3.35 0.01 -1.64 5.76 -0.58 -3.17 3.57 1.50 -0.47

-1.65 3.73 2.72 2.19 1.97 2.45 3.52 1.52 -2.26 -0.48 -0.80 0.84

2.86 0.11 1.33 -1.77 7.20 -4.50 4.90 2.86 4.34 3.74 -0.39 1.59

2.32 1.21 2.14 3.41 1.22 3.72

12.11

14.40

24.03

0.65

Portfolio Manager: Visio Capital (PTY) LtdFund Category: SA Equity GeneralBenchmark: Average of the South African Equity General CategoryLaunch Date: June 2012Fund Size: R221 millionTIC: 2.27%

Objective: The fund invests in SA listed Shari’ah compliant shares, and hence is suitable for investors with long term investment horizons (> 5 years). Fund returns are generated from a combination of both capital appreciation and dividends.

The fund is managed according to a consistent long term approach to analysing companies, whereby the fund manager looks for key characteristics and applies a bottom-up research process with a company and industry specific focus.

Proprietary models are used to analyse stocks in the portfolio, even for companies not in the portfolio. The investment team fosters an environment of independent thinking and avoids companies and investment instruments that is consider to be poorly governed. The manager strives to initiate, or support, shareholder resolutions aimed at adopting higher corporate governance standards and responsibility including in companies where the manager not have an investment.

Look for margin of safety before investing using conservative estimates and applying a stress test to potential downside risk. The fund is a concentrated portfolio of best ideas, backed by the manager’s best ideas and high conviction views. The general approach is long holding periods of stocks that they consider will provide good returns over the long period.

Rolling Returns

Time Period: 01/10/2011 to 30/09/2016


10 11 12

2013

01 02 03 04 05 06 07 08 09 10 11 12

2014

01 02 03 04 05 06 07 08 09 10 11 12

2015

01 02 03 04 05 06 07 08 09 10 11 12

2016

01 02 03 04 05 06 07 08 09

-40.0

-20.0

0.0

20.0

40.0

27four Shari'ah Active Eq. Prescient A1 FTSE/JSE Shariah All Share PR ZAR

Retu

rn



SHARI’AH-COMPLIANT GLOBAL EQUITY FUND RANGE

Shari'ah-Compliant Global Equity fund range

Funds:

Element Islamic Global Equity Fund


Time Period: 01/10/2013 to 30/09/2016

Std Dev

0.0 3.0 6.0 9.0 12.0 15.0 18.0 21.0

0.0

4.0

8.0

12.0

16.0

20.0

24.0

Element Islamic Global Equity A (ASISA) Global EQ General

Re

turn

Quartile Ranking

As of Date: 30/09/2016


-60.0

-50.0

-40.0

-30.0

-20.0

YTD 1 year Since Inception

-10.0

0.0

10.0

20.0

30.0

40.0


Re

turn

Returns


YTD 1 yearSince

InceptionInception

Date

Element Islamic Global Equity A

(ASISA) Global EQ General

26/10/2012

31/07/1992

-8.80 8.01 18.43

-7.49 10.50 11.24

Risk Statistics

Time Period: 01/11/2012 to 30/09/2016

Std DevMax

Drawdown(monthly)

UpPeriod

Percent

DownPeriod

Percent

SharpeRatio

Element Islamic Global Equity A

(ASISA) Global EQ General 15.55

15.49

-9.66 61.70 38.30

-10.61 65.96 34.04 0.80

0.89


Time Period: 01/11/2012 to 30/09/2016

09/2013 03/2014 09/2014 03/2015 09/2015 03/2016 09/2016-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0



Time Period: 01/11/2012 to 30/09/2016


11 12

2014

01 02 03 04 05 06 07 08 09 10 11 12

2015

01 02 03 04 05 06 07 08 09 10 11 12

2016

01 02 03 04 05 06 07 08 09

0.0

20.0

40.0

60.0


Re

turn


ELEMENT ISLAMIC GLOBAL EQUITY FUND

Element Islamic Global Equity

Drawdown

Time Period: 01/11/2012 to 30/09/2016

03/2013 09/2013 03/2014 09/2014 03/2015 09/2015 03/2016 09/2016-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

Element Islamic Global Equity A (ASISA) South African MA High Equity

Element Islamic Global Equity A - Risk

Time Period: 01/11/2012 to 30/09/2016

Inv Bmk1

Return

Std Dev

Max Drawdown

Tracking Error

Alpha

Beta

Sharpe Ratio 0.79

-10.61

15.49

18.43

4.08

-0.73

0.96

19.91

15.55

-9.66

0.00

0.00

1.00

0.87

Element Islamic Global Equity A - Monthly Returns


2016

2015

2014

2013

2012

-4.37 1.86 -2.25 -2.76 10.19 -7.82 -0.84 5.44 -7.25

0.65 3.44 3.17 0.30 3.30 -3.15 5.62 -0.74 -0.94 8.08 3.89 5.46

3.10 0.54 -4.04 1.16 1.58 3.86 1.22 -0.60 3.81 -3.71 5.33 3.78

11.11 -0.75 3.43 -2.51 13.37 -5.50 3.66 2.43 1.52 1.74 2.40 4.55

3.48 -5.03

32.56

16.72

39.88

-14.96

Element Islamic Global Equity A - Asset Allocation


%

Stock 95.4

Bond 0.0

Cash 4.6

Other 0.0

Total 100.0

Portfolio Manager: Shamier KhanFund Category: Global Equity GeneralBenchmark: Dow Jones Islamic Market World Index ReturnLaunch Date: October 2012Fund Size: R62 millionTIC: 2.84%

Objective: To achieve long term capital appreciation without concentrating on income requirements and to create an internationally diversified equity portfolio for investors. The investment policy followed by the manager will focus on achieving this growth for investors by investing in international equity securities, listed property, money market instruments and assets in liquid form, that have been approved for investment by the Shari’ah Supervisory Board from time to time.

Element has extensive experience in the management of Shari’ah funds starting from 1992 when they managed the Old Mutual Albaraka Equity fund until the fund was taken in-house in 2004. They also managed the Symmetry Shari’ah Balanced fund from 2005 till 2012. Both the Shari’ah Equity, Balanced and Global funds are managed in accordance to Element’s contrarian processand philosophy but with a Shari’ah overlay. The Element equity process is fundamentally a bottom up one that seeks to identify gaps between share price and intrinsic value. The Element Islamic Global Equity fund uses Credit Suisse to access a universe of global stocks. Stocks provided by Credit Suisse go through Element’s Shari’ah screens. These screens are performed by Ideal Ratings, an agency that looks at the nature of the business followed by financial screening to ensure that the business complies with limitations set out by the AAOIFI board. Once these screens are successful shares will be scored on operational and financial metrics. Funds are then valued based on cash flow return of an investment which are normalized over a cycle. A momentum factor is taken into consideration to identify contrarian opportunities. The top 50 ranked opportunities are presented to the Element Supervisory Board. Shares that are selected are purchased directly by the fund and held in their global custodian account. The Non-Permissible Income (NPI) portion is extracted by Element as the dividend is declared. This fund is ideal for investors who seek Shari’ah compliant global equity returns without having to purchase foreign currency.

Investment Growth

Time Period: 27/10/2012 to 30/09/2016

03/2013 09/2013 03/2014 09/2014 03/2015 09/2015 03/2016 09/201680.0

100.0

120.0

140.0

160.0

180.0

200.0

220.0

Element Islamic Global Equity A 194.0 (ASISA) South African MA High Equity 147.4


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SHARI’AH FUND GUIDE - syncbs.co.za · University of Cape Town and a BBA (Bachelor ... Murabaha...

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