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 The U.S. Muslim population is expected to reach 6.2 million by 2030,
almost three times the nation's 2.6 million Muslims in 2010, the Pew
Research Center estimates.
Muslim-Americans are younger and better educated than the average
U.S. citizen, according to Gallup data. Moreover, they want to see a
greater number of appropriate financial products, according to
market research firm DinarStandard.
Meeting their investing needs is similar to working with clients who
want socially responsible investments, but it requires additional
expertise.
Under Islamic, or Shariah law, investors must shun companies
involved in, for example, alcohol, tobacco, gambling or weapons -
restrictions common to many religious groups. Shariah law also
prohibits interest, because loans should be charitable acts. This
makes buying fixed-income securities problematic, and purchasing
banking company stocks impossible.
Companies must also have little debt: about 30 percent
interest-bearing debt to trailing 12-month average market
capitalization, according to organizations that set Islamic
investing standards.
More investment products are becoming available. They include sukuk,
the Islamic alternative to bonds, where returns are based on profits
from an underlying asset. One fund, Azzad Wise Capital Fund, is
available to U.S. retail investors. More choices will likely emerge,
advisers say.
Morgan Stanley adviser Mark Rogers in Farmington Hills, Michigan,
helped his first Muslim-American client about 10 years ago and now
serves more. He does not view them differently from clients who want
socially responsible investments, he said.
“Once you understand how to apply the filter, it’s just business as
usual,” Rogers said.
Naushad Virji, chief executive officer of Sharia Portfolio, launched
his investment advisory firm in Lake Mary, Florida, 10 years ago and
now serves clients in 21 states, he said.
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Virji generally sticks to individual large-cap stocks, names with
low debt such as Apple Inc and Walgreens Boots Alliance Inc but said
he is excited about developments in Islamic finance.
Amana Mutual Funds Trust, for example, and a new ETF from Falah
Capital, Falah Russell-IdealRatings U.S. Large Cap ETF, are helping
meet investors’ needs. But there is more to be done, Virji said. “We
are in the infancy of Shariah-compliant investing in this country,”
he said.
Advisers should go through each holding with clients to make sure
they are happy with the choices, said Frank Marcoux, a partner at
Wells Fargo’s Nelson Capital Management, a Wells Fargo & Co unit.
Some clients are even more strict than even the standard-setters,
Marcoux said.
Clients also should understand they cannot expect to beat a
benchmark, when chunks of companies are missing, Marcoux said.
But the main point is that advisers can help Muslims get in the
market, Marcoux said. "People are surprised that this type of
product and strategy even exists, and very appreciative."
(Editing by Suzanne Barlyn, Lisa Shumaker)
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