Halal is an Arabic word meaning lawful or permitted. Halal investing means investing that is permitted under Islamic principles. Halal investing is also referred to as “Shariah-compliant” investing. Halal investing is a form of socially responsible investing.
We offer separately managed accounts where we follow Shariah rules as defined by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), a global Islamic finance standards setting body, governed by an international panel of highly respected Sharia scholars.
We look at the universe of available investments (primarily public listed companies) and run two filters to eliminate non-Shariah compliant investment options.
(1) Business filter:
We avoid investing in companies that derive greater than than 5% of operating profit from non-Halal business. These are
- interest based businesses such as banks and insurance
(2) Financial filter:
After eliminating investments based on the Business filter, we look at the financial statements. There can be many different criteria applied but to explain in simple language, we avoid companies with poor balance sheets and that have too much financial leverage (debt). This actually reduces investment risk as such companies can run into difficulties when their business weakens.
Clients who wish their accounts to be managed as explained above, can contact us to discuss this option.