Islamic mutual funds' financial performance and international investment style: evidence from 20 countries

We pursue the first large-scale investigation of a strongly growing mutual fund type: Islamic funds. Based on an unexplored, survivorship bias-adjusted data set, we analyse the financial performance and investment style of 265 Islamic equity funds from 20 countries. As Islamic funds often have diverse investment regions, we develop a (conditional) three-level Carhart model to simultaneously control for exposure to different national, regional and global equity markets and investment styles. Consistent with recent evidence for conventional funds, we find Islamic funds to display superior learning in more developed Islamic financial markets. While Islamic funds from these markets are competitive to international equity benchmarks, funds from especially Western nations with less Islamic assets tend to significantly underperform. Islamic funds’ investment style is somewhat tilted towards growth stocks. Funds from predominantly Muslim economies also show a clear small cap preference. These results are consistent over time and robust to time varying market exposures and capital market restrictions.

How Islamic is al-Qaeda? The politics of Pan-Islam and the challenge of modernisation

This article investigates the contested ideology of al-Qaeda through an analysis of Osama bin Ladin’s writings and public statements issued between 1994 and 2011, set in relation to the development of Islamic thought and changing socio-political realities in the late nineteenth and twentieth centuries. Challenging popular conceptions of Wahhabism and the “Salafi jihad”, it reveals an idealistic, Pan-Islamic sentiment at the core of his messages that is not based on the main schools of Islamic theology, but is the result of a crisis of meaning of Islam in the modern world. Both before and after the death of al-Qaeda’s iconic leader, the continuing process of religious, political and intellectual fragmentation of the Muslim world has led to bin Ladin’s vision for unity being replaced by local factions and individuals pursuing their own agendas in the name of al-Qaeda and Islam.

Spiritual capital: the co-evolution of an ethical framework based on Abrahamic religious values in the Islamic tradition

Purpose – The aim of this paper is to investigate how values from within Abrahamic religions could be adopted to improve liberal market economies’ (LMEs’) corporate governance business practices. Design/methodology/approach – The concept of spiritual capitalism is explained from an Islamic perspective by adopting three universal Abrahamic values to critically analyse LMEs and offer an ethical alternative to current capitalism concerns. Findings – It is found that LMEs can be improved by considering all stakeholders, putting ethics before economics, and introducing shared risk/reward plus lower debt. Originality/value – The paper compares LMEs/Co-ordinated market economies (CMEs)/Islamic countries economies (ICEs) within an ethical framework for LMEs.

A review of Islamic mutual funds’ financial performance and investment style in Muslim and non-Muslim countries

Islamic finance has grown beyond its reputation of providing small-scale banking options and now provides investment and financing options for complex large-scale commercial transactions. Islamic investments are one area that has attracted the attention of investors due to its performance, especially during the economic downturn. The Shari’ah compliance nature of Islamic funds provides an opportunity for those Muslim investors to be part of the global investment sector who have previously been reluctant to invest in conventional mutual funds. The fact that the funds’ managers are prohibited from investing in activities such as weapons production, alcohol production and interest-bearing finance operations, makes Islamic mutual funds also attractive for those Non-Muslim investors who wish to invest ethically. Today there are hundreds of Islamic equity indices offered by Dow Jones, FTSE, MSCI and S&P. Despite the growing importance of Islamic funds, there have been limited studies exploring the performance of Islamic funds worldwide. Due to very limited data sets and not too rigorous analytical methods, these existent studies have neither investigated Islamic funds’ financial performance in noticeable detail nor analysed the investment style of more than six funds. For instance, relevant questions such as the financial performance of Islamic mutual funds’ beyond their investment styles or a difference in performance between funds from Muslim and non-Muslim countries have nearly not been investigated at all. Very recently, a study by Hoepner, Rammal and Rezec (2011) analysed the financial performance and investment style of 262 Islamic equity funds from 20 countries in five regions (Africa, Asia-Pacific, Europe, Gulf Cooperative Council-GCC, and North America). As comparison, previous studies did not even analyse 60 funds. Hoepner et al.’s study sampled a period of two decades and was therefore able to test the performance of the funds during economic booms as well as economic downturns. The findings of the study provide new insights into the performance of Islamic mutual funds in Muslim and Western markets and during financial crisis.

Islamic law and international law: the terms of a relationship

The relationship between Islamic Law and other legal systems (basically western type domestic legal orders and international law) is often thought of in terms of compatibility or incompatibility. Concerning certain subject matters of choice, the compatibility of Islamic (legal) principles with the values embedded in legal systems that are regarded as characteristic of the Modern Age is tested by sets of questions: is democracy possible in Islam? Does Islam recognize human rights and are those rights equivalent to a more universal conception? Does Islam recognize or condone more extreme acts of violence and does it justify violence differently? Etc. Such questions and many more presuppose the existence of an ensemble of rules or principles which, as any other set of rules and principles, purport to regulate social behavior. This ensemble is generically referred to as Islamic Law. However, one set of questions is usually left unanswered: is Islamic Law a legal system? If it is a legal system, what are its specific characteristics? How does it work? Where does it apply? It is this paper`s argument that the relationship between Islamic Law and domestic and international law can only be understood if looked upon as a relationship between distinct legal systems or legal orders.