Following Shariah law — and thus steering clear of bank stocks — the Amana Trust Income Fund has been a stellar performer
What do a Muslim-guided mutual fund and the Occupy Wall Street movement have in common? A strict aversion to financials, among other things. In the fund's case, this aversion has led it to the top 1% of returns amongst large-cap mutual funds over the past 10 years.
The $1.4 billion Amana Trust Income Fund Ticker:(AMANX) has an annualized return of 8.92% over the last 10 years, which ranks it in the top 1% of large-cap-blend mutual funds, according to Morningstar Inc.
Part of the secret of the fund's success: It does not invest in financials or any businesses that generate interest from loans. That prohibition is based on Shariah law, which guides the business principals of Islam. The Quran, the basis of the Islamic faith, prohibits Muslims from paying or receiving interest for lending money, which is of course the basis of the banking system today. The fund also avoids businesses that profit from alcohol, pornography or gambling.
By not being invested in financials, the fund was able to avoid the worst of the stock market's drop in 2008. As the S&P 500 was dragged down 37% such firms as Lehman Brothers Holdings Inc. and Bear Stearns & Co. Inc., the fund's net asset value fell 23.4%, the best showing among large-cap funds that year.
Though the fund is based on Islamic principals, the fund is open to all investors. The Occupy Wall Street movement is returning Tuesday, and some advisers are attributing the protests to an increase of interest in socially conscious investing.
As with last year's protests, big banks again are expected to be a focal point.
“Four years after the financial crisis, not a single of the too-big-to-fail banks is smaller; in fact, they all continue to grow in size and risk,” the Occupy Wall Street press office wrote to Bloomberg News in an e-mail.