Shariah-compliant investing is a rapidly growing sector in the world of finance. It is catering for investors who seek financial products that align with their religious beliefs.
The concept, which emerged 50 years ago, touched a new peak in 2019, as its assets amounted to USD 2.88 trillion. It was Islamic finance’s highest growth record post-2008-09. Even the COVID outbreak failed to stem the sector’s growth, as by 2024, the market size in this part of the global economy will rise to USD 3.69 trillion.
Islamic finance, where funding sources are governed by Shariah and other principles of Islam, has earned prominence since 2020, due to its digital transformation, which makes investments more accessible.
Warba Investment Management or “WIM”, which is Warba Bank’s investment management arm, has emerged as an important player in the field of Islamic finance, as it offers a proactive approach to Shariah-compliant investing and provides access to superior global investment products and opportunities across a wide range of asset classes.
Knowing WIM’s philosophy inside-out
Warba Investment Management underpins its investment philosophy by applying methodical processes throughout its product development and portfolio management processes, which help the lending body to minimize its human biases and errors. WIM’s core business principles lie in building long-term partnerships with clients, managers, and service providers and growing together with its stakeholders through shared success. Holding itself to the highest fiduciary standards in the industry of Islamic finance, WIM ensures the alignment of customers’ interests and its business transparency, while providing compensations, apart from ensuring timely communication and accessibility.
With a vision of expanding the sector of Islamic finance, WIM offers investors the opportunity to build fully diversified, Shariah-compliant investment portfolios that closely match the risk and returns of conventional portfolios where customers no longer remain confined to the usual investment destinations like real estate and equities. With a wide range of financial products and services, WIM aims towards providing its investors with access to a broad, diverse range of asset classes while adhering to Shariah principles.
Investment Products and Services
WIM is known for providing its clients with financial tools and investment vehicles that support the creation of a diversified, time-tested and robust investment portfolio. Warba Investment Management’s products comply with four principles: true diversification, superior skill, consistency in performance, and cost efficiency. The products and services include leasing, real estate, and money market instruments. WIM is also engaged in developing a diversified product pipeline across various asset classes, apart from formulating customised investing strategies in fields such as Sukuk, listed equities, REITs, private equity, and infrastructure.
Let’s explore WIM’s modes of operations in detail.
Leasing: WIM’s leasing strategy provides clients with access to a diversified Shariah-compliant portfolio of business essential, core capital equipment subject to net leases, to high-quality investment grade and investment-grade equivalent corporate lessees. The lending body’s equipment leasing funds are structured funds which have grown in market popularity. These funds, which are also considered the ultimate beneficial owner of the leased assets, also receive the rent proceeds at regular intervals.
Real Estate: Warba Investment’s Shariah-compliant real estate investment opportunities provide clients with access to a diversified portfolio of real estate assets across the geographies. Opting for this solution provides clients with the potential for stable, inflation-protected long-term returns. Real estate, along with other real assets, has a historically-proven record of generating returns positively correlated with inflation; apart from performing especially well when accompanied by strong economic growth driving demand for property spaces.
Money Market: WIM offers Shariah-compliant money market investment products that ensure liquidity for clients. They offer stability and diversification as an alternative to cash equivalents, and are an efficient short-term cash management solution for investors in longer-duration funds.
Warba Investment Management also provides portfolio management services, mainly custody and non-discretionary management. WIM recently added more strength to its portfolio management capabilities by developing a proprietary model generator that provides target asset allocation levels, based on inputs.
What makes WIM unique?
WIM takes a total portfolio approach to invest, and the method helps its clients build a robust portfolio through proven investing principles that can achieve superior returns over the long run. Risk and returns are measured at the portfolio level rather than just on individual investments. This approach helps identify redundancies/overlaps in exposure and helps create true diversification, thus enhancing returns on a risk-adjusted basis.
In addition to the total portfolio approach, Warba Investment Management also places importance on building a global portfolio that can exploit financial opportunities across the regions based on changing market trends in those parts of the world, thus reducing geographical risks and overall portfolio volatility.
WIM’s ultimate aim is to offer its clients access to top-performing managers in every asset class without compromising on quality. The bank is working towards maintaining investments in every product, along with clients, to ensure alignment of interests.
WIM’s commitment to working with top-performing asset managers and applying rigorous due diligence processes ensures that only the best investment opportunities for its clients. Moreover, the lending body’s expansion of Shariah-compliant investment opportunities gives investors access to a broad range of asset classes that meet their investment goals while adhering to Islamic finance principles.
The world of Islamic finance is expanding and expanding fast. In this scenario, WIM presents itself as an excellent choice for investors seeking Shariah-compliant investment products and services with its strong business philosophy, range of investment products, and total portfolio approach to investing.