What IFG will do to help bring about a truly Islamic economy
Ibrahim Khan
05 January 2024 8 min read
Many of you will have seen our detailed review of Wahed previously. As part of that review, I invested £3k into the Wahed ultra-conservative portfolio because I wanted access to sukuk, which I wasn’t able to get anywhere else.
I checked into my Wahed account recently and discovered that the £3k investment made at the end of January is now worth ~£3400 – an increase of approximately 13% in 6 months.
13%! In the “Very Conservative” portfolio. In 6 months. That made me sit up a bit. Something was clearly up.
Why The Fund Went Up
From a more detailed dig into the Franklin Global Sukuk Fund – X (Qdis) USD – the fund that Wahed put my money into, I concluded that a mixture of the following reasons were responsible for the profit:
- The Fund is denominated in USD, which is great for me because GBP is currently doing pretty badly against the dollar.
- The underlying sukuk that the Fund has bought into are doing well – i.e. they’re paying up on time and increasing in value. This in turn increases the value of the Fund itself.
- The Fund pays a healthy 4.67% distribution yield, and dividends are paid out quarterly. These then feed into the overall profits.
- The Malaysian and Indonesian currencies in which the Fund receives its income, have strengthened against USD, meaning they give the Fund more USDs when converted.
- The sukuk market has become more appealing as sukuk issuance has decreased (at least the type the Fund holds) and the Gulf economies strengthen due to rising oil prices (and so are expected to issue less sukuk), and so the value of existing sukuk have gone up.
I remember at the time of the initial article people questioned why I would put my money into a Fund that has historically not done well, and when the equities funds Wahed offers are doing far better – but my answer then was as it is now: markets are cyclical and it is important to have a significant chunk of one’s assets in fixed income and low volatility asset classes as a hedge against downturns. Sukuk funds are cheaper when equities are flying precisely because equities are flying.
My Strategy Going Forward
Given that I think GBP will continue to remain weak and possibly weaken further as we head to Brexit, and given the Wahed ultra-conservative fund isn’t exactly volatile, I think a nice safe way of doing a little foreign exchange arbitrage is by holding a chunk of my overall portfolio in USD-denominated funds such as the Wahed Invest ultra-conservative portfolio. That’s why I’m investing a further £10k today.
Do you agree with my decision? Interested to hear your thoughts!
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