Saturna reaching out to Muslim investors

Nick Kaiser and Monem Salam of Saturna Capital have turned the company’s Amana funds — an investment fund that adheres to strict Islamic investment doctrine — into the highest-rated such fund in the world, according to Chicago-based Failaka International.

Heidi Schiller
   According to Shariah — Islamic law derived from the Koran — observant Muslims should not invest in pork, alcohol, gambling, pornography or any company that accrues or generates interest.
   Sound complicated?
   That’s what Nick Kaiser thought back in 1989 when he founded Saturna Capital Corporation in Bellingham and began managing investment funds for Muslims.
   Now, more than 20,000 shareholders invest in Saturna’s Amana funds, which are tailored specifically to Islamic investing principles. Most are Islamic, but some are non-Muslims investing in what they say is a profitable, high-performing fund.
   In March, Failaka International, Inc., an Islamic fund monitoring and rating company based in Chicago, awarded Saturna’s efforts with recognition as best Islamic fund manager for 2005 out of 140 international funds.

Religious investment pays off
   Khalid Galant, an M.B.A. student at Western and a Saturna intern, began investing in the Amana funds in 2004 for both religious and financial reasons. Born in Cape Town, South Africa, he is considering going into the Islamic investing field after graduating with a focus in African and Middle Eastern business.
   “I can practice my beliefs and make a lot of money doing it,” he said.
   Shariah law has guided what Muslims can and cannot invest in since the time of the prophet Muhammad in the seventh century. Historically, Islam is associated with Arabic traders who abided by such laws, and observant Muslims continue to follow them, Gallant said. Breaking them would be a sin.
   One of the implications of Halal investing, as Islamic investing is called, is that observant Muslims cannot invest in banks, bonds, speculative investments or hedge funds because they accrue or generate interest, Galant said.
   For this reason, not only are Saturna’s Amana funds consistent with Islamic law, but they are also a good investment. Some might say they are less risky or less volatile because of the absence of interest-based investments, he said.
   “Amana funds are good investments because their performance is more sustained over a long period of time,” he said.
   And the guidelines regarding pork, alcohol and gambling are not rigid. A company that sells many products, including a small amount of those forbidden goods, is considered Halal as long as those products only represent a small percentage of the company’s total offerings.
   The Amana funds are such a good investment, in fact, that Galant’s non-Muslim friend, a fellow business student, invested in them because of their consistently high Morningstar ratings.
   In 2000, the Amana funds were worth $26 million. In November of 2005 they had grown to $100 million and as of April 2006, they are worth approximately $200 million.
   In comparison, funds in the same category on average have 4 percent lower year-to-date returns, according to Yahoo’s finance website.
   Monem Salam, Satuna’s director of Islamic investing, Salam attributes this growth to the funds’ performance and Saturna’s increased marketing of the funds, which both lead to more interest from large investment companies such as Fidelity Investments and Charles Schwab.
   “They’re buying them for financial reasons, not necessarily for religious ones,” Kaiser said of Amana’s shareholders.
   Only five of Amana’s shareholders are Bellingham residents.
   “We’ve pretty much captured the market here,” Salam said.

A new trend in investing
   Before Islamic funds and investing practices gained momentum in the ‘90s, Muslims had few options to invest their money, and some, like Galant’s father, ended up “purifying” their investments by donating any amount of interest they accrued to charities, he said.
   Some simply kept their money in cash, Salam said, or they invested it in non-Halal funds, disregarding Shariah law.
   Now, Middle Eastern investors line up at the doors of investment firms when certain companies go public, much like lines of consumers at Wal-Mart itching to buy a popular toy for their children during Christmas, Galant said.
   Middle Easterners want to find new, sustainable ways of generating wealth other than through oil, he said.
   “It’s fashionable and trendy to invest now (in the Middle East),” Galant said.
   In the U.S., Kaiser said he is aware of only two other Islamic funds. Out of 140 international funds, Failaka named Saturna best Islamic fund manager for 2005; Salam accepted the award in Bahrain in March.
   But Saturna’s success has not been without hurdles. In 2002, the FBI investigated a chairman of the Amana Funds Trust board for links to terrorism. No wrongdoing was discovered and the FBI apologized, Kaiser said.
   “Our government does many silly things,” Kaiser said of the investigation.
   Other than two shareholders who expressed concern over the issue, Kaiser said he doesn’t feel the investigation — or any other post 9/11 environmental factors — has affected Saturna’s reputation or financial interests in any way.
   “I’m not scared now and was not scared then,” he said of possible repercussions to his business due to the investigation.

Spreading the word
   Part of Salam’s job is to travel the country giving outreach seminars at Mosques to educate Muslims on how they can invest their money consistent with Shariah law. He hopes his effort is instrumental in increasing Muslims’ wealth in the U.S.
   Next fall, Saturna will help sponsor a seminar at Western Washington University, and Salam said he’d like to see Western create the first business program at a U.S. university specifically focused on Islamic investing.
   For him, it’s not just a business goal.
   “It’s very rewarding for me to be able to go out and teach people how to live their lives better, according to the Koran,” he said. “It’s more than just a job for me.”

      

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