The year 2011 marked a significant chapter for the Islamic retail funds industry in the US, as the 25th anniversary of the launch of the country’s first Shariah compliant fund – Amana Income Fund. The fund’s net asset value (NAV) was miniscule during the early years, hardly creating a ripple in the global Islamic funds industry, and in 2003, the total assets under management for both the Amana Income Fund and the Amana Growth Fund stood at just US$40 million. However, the Income Fund has since grown to become the world’s second largest fund.
Saturna Capital, which also offers conventional funds, has two other Shariah compliant retail funds – the Amana Growth Fund, the largest global Shariah compliant fund, and its latest offering: the Amana Developing World Fund.
Since the launch of the Amana fund, other forms of Shariah compliant products have made their way into the US market. In the 1990s institutions such as LARIBA Finance, Guidance Residential, Devon Bank, University Bank, Ameen Housing and several local cooperatives in different part of the US began offering home financing to Muslims in the country. In 1999, Dow Jones launched its Dow Jones Islamic Market Indexes; the first indexes that measured the global universe of investable equities with a Shariah compliant screening. It currently has more than 100 indexes.
However, despite this, Shariah compliant mutual funds have seen very little development in the US. There are currently seven known Shariah compliant funds, aside from the three Amana funds. Investors in general have also not been very receptive towards Shariah compliant exchange traded funds (ETFs), which, unlike their conventional counterparts, have grown into a US$1 trillion market since they were first introduced in the US in the early 1990s.
On the 19th October last year, US investment company Javelin Investment Management ceased trading of what was believed to be the country’s first Islamic US ETF – the JETS Dow Jones Islamic Market International Index Fund – after launching it on the 1st July 2009. According to the company, the fund had failed to attract the anticipated level of investor interest. Brint Frith, the president and founder of Javelin, said at the time that Shariah-based investing has a promising future with seven million Muslims in the country but was struggling to reach the target investors through the marketing channels used by conventional ETFs.
Javelin is not the only company facing an uphill battle. Efforts by another investment company to launch a second Shariah compliant ETF have also been dampened by the lack of seed money since announcing its intention in 2009.