Australian investors will have access to a new ‘ultra ethical’ fund, investing on Islamic principles with the launch of Crescent Wealth and its Australian equities fund, the first of a series of products it plans to bring to market.
The Crescent Australian Equity fund begins life today with $5.5 million of seed capital from Aon Hewitt and will target the retail market and SMSFs in particular.
While acknowledging that Australians have had access to the global Islamic market for over 20 years, Crescent Wealth aims to deliver a product available to all Australians.
“We use Islamic principles and underlying investment philosophies developed over 1400 years to invest and we’re open to all Australians,” said Talal Yassine, founder and managing director, Crescent Wealth.
“So while the Islamic community of Australia will be one of the early segments, I’m expecting them to be a very low proportion of our overall investment portfolio.”
Crescent Wealth has modeled itself on Saturna Capital in the US, which has attracted close to $4 billion in FUM within four years, 80% of which is from outside the Islamic community, according to Yassine.
The Australian equities fund will be heavily weighted to resources, in part because of the reduction of choice that an Islamic compliant portfolio manager has at their disposal.
Crescent Wealth will not invest in companies that derive profit from debt, weapons, pornography, gambling, or alcohol, barring access to around 40-45% of the investment universe.
Companies will then be filtered for investment returns by a sub-advisory team from Sigma Advisory to create a portfolio of 20-40 stocks.
If a company derives more than 5% of its profit from a business that does not comply with Islamic principles it is disregarded.
However, if up to 5% of its profit was interest earned from a bank then Crescent Wealth has a system of purifying that amount, removing it from investor returns and distributing it to various charities.
Crescent Wealth plans to launch a compliant property fund and an international equities product by the end of the year followed by a fixed income fund in the first quarter of 2012.
Beyond that, the plan is to launch an Islamic based superannuation fund with Crescent Wealth estimating that Islamic investing in Australia will reach $13 billion by 2019.
“We are building for the long term, we’re the first Islamic wealth manger in Australia but we’re starting to build an institution,” said Yassine.
“We are in the early days of creating partnerships and working with various companies that are interested in providing an innovative new product to the Australian investment community and number two, help access the $1.4 trillion Islamic finance market.”
Information below is from the Press Release
What is Islamic investing?
The Crescent Australian Equity Fund is advised by a Shariah Supervisory Board (SSB) comprising world-leading scholars in Islamic finance. Islamic finance differs substantially from conventional finance, and comprises four core principles:
- Payment and receipt of interest: The prohibition of interest arises from the Islamic view that money should be used only as a medium of exchange, a store of value, and a unit of measurement. Money itself possesses no intrinsic value. The charging or receipt of interest – or ‘riba’ – is therefore prohibited. Any return on money invested should be linked to the profits of an enterprise.
- Uncertainty: The existence of uncertainty – or ‘gharar’ – in a contract is prohibited. Everyone participating in a financial transaction must be adequately informed and all fundamental terms such as price or quantity must be clearly defined at the outset.
- Speculation: Investments that rely on chance or speculation, rather than the efforts of the investor, to produce a return are prohibited. Normal commercial risk-taking and related speculation is otherwise permitted.
- Social and moral values: Similar to socially responsible investing, Islamic investment filters out socially detrimental activities, such as gambling, pornography, alcohol and weapons. For the most part, Islamic investing is consistent with conventional value-based investing, which mandates social values and good governance.
- Through its Board of Islamic scholars, Crescent Wealth applies a number of qualitative screening filters to ensure all investments held in the fund are in accordance with Islamic principles. Industries that are avoided include: alcohol, tobacco, weapons, pork, financial services, gambling, pornography, leisure & media.
- The CAEF is weighted to resources and mining equities, and some small cap stocks. Investments, for example, include BHP Billiton, Rio Tinto and United Group.
- Founded in 2007, Crescent Wealth is the first (and currently the only) Australian wealth manager with a specialist focus on Islamic investing.
- Founded in 2007, Crescent Wealth has been granted an Australian Financial Services Licence (AFSL) by ASIC.
- We partner with some of Australia‟s leading organisations, including Aon Hewitt, Sigma Funds Management, Ernst & Young, J.P.Morgan, Norton Rose and Thomson Reuters.
- The role of Crescent Wealth is to manage all aspects of its funds under its ASIC licence, including product development, registration, legal, accounting, auditing, marketing and distribution. The CAEF is sub-advised by Sigma Funds Management.
- Crescent Wealth founders, Talal Yassine OAM, Samier Dandan and Issam Eid, bring a track record of successful entrepreneurship and significant funds management, legal and investment banking experience.
- Crescent Wealth is already the leading pioneer in Islamic investing in Australia, and aspires to grow its position as the leading provider of Islamic funds. It also aspires to grow by offering all Australians a genuine alternative to more traditional investments.
- Target market comprises Muslim community organisations, high-net-worth individuals, professionals, and institutional investors in Australia and, eventually, overseas.
- Our four planned Islamic funds (Australian Equity Fund, International Equity Fund, Diversified Property Fund and Income Fund) are open to both private and institutional investors. They will form the platform for our unique superannuation offering, where we see significant potential for growth.
Crescent Australian Equity Fund (CAEF)
The Crescent Australian Equity Fund is Australia’s first licensed Islamic managed fund. It is open to all investors, including private and institutional. It has a bias towards resource, mining and small cap equities from an investable universe of about 200 stocks. The fund is sub-advised by Sigma Funds Management in Sydney, a highly experienced Australian equity manager that is rated ‘A‘ by Van Eyk.
- Target size: $500m
- Target return: 6.79%
- Management fee: 1.79%
- Minimum investment: $10,000
- Investment horizon: 3 and 5 years