Shariah-compliant investing should become a mainstream offering for many pension and investment providers.
According to the Office for National Statistics in 2018, there are 3,372,966 British Muslims, which equates to 5.1% of the total population.
Shariah-compliant investments are governed by the requirements of Shariah law and the principles of Islam.
The rules mean that companies involved in certain activities will be filtered out of a Shariah-compliant fund.
This is a market with a lot of opportunities. But there is a lack of offering for British Muslims.
‘Tick box exercise’
International Adviser spoke to Christine Hallett, managing director for Options UK, about the lack of creativity in the marketplace for Shariah-compliant products.
“We’ve always had an interest in this area,” Hallett said. “The marketplace has evolved since the last census in 2011. That was an interesting read and gave a lot of statistical analysis of the Muslim community, their age groups and small- and medium-sized enterprises.
“It’s a bit like the whole ESG thing is that people have ticked the box and said they’ve got it. Most fund managers or workplace pensions say they have got Shariah-compliant offerings. It’s not a great sort of proposition, not much thought goes into it. It’s almost like a tick-box exercise, now it has to be a bit more.
“The numbers of people I’ve say we can’t really be part of some pension schemes because it’s not compliant, and therein lies the problem.
“They should have alternatives. I think it’s incumbent on us all, whether we are an employer or a provider, that the investments are appropriate. We should consider our target market and add value.
“There has to be more debate. The big firms are out for volume and they may not consider it a big market share, although it is quite big in its own right. I think it’s got to come through the industry’s desire to add value and be inclusive.”
ESG and private pensions
Hallett also discussed how the advice market has not fully understood the potential of ESG in the retail market.
“I think for individuals who take responsibility for their own decision, in terms of what they want to invest in, there’s starting to be more meaningful information,” she added. “I think there’s a big education piece still to be done because I think the investment managers themselves are not there yet, in terms of where their full strategy is.
“There’s real action now being taken across many investment managers, but I don’t think we have enough experience yet.
“I think we’re probably another two or three years of what I’d call solid and sustainable performance data from understanding the impact of taking a different strategy, and what the impact of ESG has or doesn’t have on an investment strategy.”