Islamic Finance : Instruments and Markets,
Chapter Managing Sharia-Compliant Portfolios by John A. Sandwick



I have had the honor to be labeled as one of the world pioneers of Islamic banking for my work in sharia-compliant wealth and asset management. This work concentrated on creating what appears to be the first-ever sharia-compliant portfolio allocations and the creation of some of the first-ever Islamic investment products that meet global professional standards.

Since 2002 the Islamic banking industry generally witnessed expansive growth, which appears will show total assets over $1 trillion within the coming few years. Dedicated banking professionals can be congratulated for expanding and innovating the Islamic banking space. Islamic retail, corporate and investment banking have benefited most from a global alliance of professionals committed to creating a world-class banking service. Today there are no qualitative differences left between Islamic and conventional banking in the retail, corporate and investment banking sectors.

Unfortunately, those same innovations were absent in Islamic asset management. For example, while the conventional investment universe counts more than 60,000 mutual funds worldwide, the number of Islamic mutual funds doesn’t exceed 750. Worse still, after filtering and sorting these funds there are perhaps only 50 that meet global professional standards.

Islamic wealth and asset management, therefore, is still in its infancy. There is much work to be done. As has been duly noted by Ernst & Young in its annual Islamic Funds & Investments Report, there are large gaps in the availability of certain Islamic products, most particularly in the fixed income and money market allocation sectors, but really across the entire spectrum of asset allocation. Among the qualifying funds today most are simply one or another type of equity fund. Yet, even here the gaps are enormous: whereas there are over 20,000 equity-related mutual funds in the conventional asset management industry, there are not more than 35 sharia-compliant equity funds that meet global standards.

Some banks create Islamic asset management divisions, yet their products are not anywhere what one would expect from their size and prestige. We’ve witnessed some of the biggest names in banking flagrantly selling derivative-based structured products and labeling them as “Islamic asset management.” We’ve seen others fall over themselves to join the rush to deliver illiquid and ill-conceived private equity to the markets, all with a fatwa wrap. None of the innovation, discipline and concentration of resources seen in Islamic retail, corporate and investment banking seems to have been applied to Islamic asset management.

My personal mission is to merge the professionalism and innovation we find in the conventional asset management universe with the precepts of sharia, in the process providing practical, useful solutions to both savers and users of capital. Now that we have seen there are no barriers between Islamic banking and good banking, and that the two are mutually compatible, there can be no reasons for banks and investments companies everywhere to avoid delivering world-class sharia-compliant investment management to their clients.

Join me in these web pages to explore my view of the Islamic banking universe, and the practical solutions I’ve developed with others to provide world-class sharia-compliant wealth and asset management.

John A. Sandwick
Specialist, Islamic Wealth & Asset Management