Public Asia Ittikal Fund not Syariah Compliant?

I’ve been meaning to blog about this topic for quite sometime now.

While I was in Malaysia, I received Public Asia Ittikal Fund’s (PAIF) annual report for the financial period from 2nd of August 2006 to 31st October 2007.

In the “notes to financial statements” section, they listed out pretty much all of the companies that they are holding in their portfolio.

One company caught my attention. ABC Learning Centre, an Australian company.

According to ABC Learning Centre’s financials, I noticed that their total debt divided by market capitalisation is somewhat in the vicinity of more than 50%.

I used to hold ABC Learning Centre in my portfolio myself and I’m pretty sure the ratio has been maintained above 50% for quite some time. ABC Learning Centre has adopted an aggressive takeover strategy for a while now, utilising heaps of debts.

Now, according to Dow Jones Islamic Market Shari’ah Supervisory Board, the total debt divided by trailing 12-month average market capitalisation should be below 33%.

I am indeed puzzled. Correct me if I’m wrong, but for that criteria alone, ABC Learning Centre is not syariah-compliant.

Please, somebody out there much more knowledgeable than me, mind trying to explain this rather peculiar phenomenon?

Perhaps there’s a rather logical explanation to this or perhaps the methodology of Public Mutual’s syariah supervisory board is different. Or perhaps there’s information in the report that I missed out on?

Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.

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About nadlique

This blog is about the journey of a 28-year-old Malaysian towards financial freedom. This blog was started back when the blogger was 21 years old. However, his journey towards financial freedom had begun way before that. Materials such as investing, business, entrepreneurship, equities, and real estate are presented. The author also posts his thoughts and observations on life in general.

Comments

  1. If it’s not syariah compliant, how come they approved this fund as an islamic fund?

    This matter has to be taken seriously.

  2. I can’t say for sure whether it is indeed not syariah compliant.

    Do you know how to bring this matter up to Public Mutual’s attention and ask for clarifications?

    I might e-mail my UT consultant about this matter.

  3. Interesting question..

    If you refer to the prospectus of the fund, under the section “Authorised Investment”, you will see the following statement:-

    “The Fund may invest in the following investments subject to the SC Guidelines, Shariah Requirements and the Fund’s objective and as approved by the Shariah Advisory Council of the SC and/or the Shariah Adviser…”

    So we should be referring to SC guidelines to determine which are the Shariah-complaint counters.

    You can refer to the following link to have a better understanding.

    http://www.sc.com.my/eng/html/icm/icm_default.html

    Honestly, I have never looked into this in depth. If you receive any valuable information from your UT agent, do share with me.

    Meanwhile, you can visit Public Mutual Website at http://www.publicmutual.com.my and drop them an email to seek for clarification. (go to “contact” page)

  4. “The Fund may invest in the following investments subject to the SC Guidelines, Shariah Requirements and the Fund’s objective and as approved by the Shariah Advisory Council of the SC and/or the Shariah Adviser…”

    While that is true, I doubt that SC supervises markets around the world. Public Asia Ittikal holds shares from around the world. They can’t be looking over China, Australia, and the rest of the world, while maintaining order in the Malaysia’s financial market.

    Also, in the prospectus, there’s also a section whereby it states that there’s always a risk that the fund might own shares that are non-syariah compliant.

    I had a look at SC’s guideline, and saw the 5%, 10%, 25% and etc. benchmark of allowed non-Islamic activities in a company. However, as I have found with ABC Learning Centre, more than 50%. This is what I’m trying to figure out. If I am wrong, then I need Public Mutual to explain to me how they gauge whether or not a company is syariah compliant.

    Indeed, I have contacted my UT agent about this. The first reply was not satisfactory. I asked for a much detailed and technical explanation to which up till today, I haven’t got any response.

    I know I might seem to be going overboard over this matter but hey, I did pay the 6.5% service charge. Not to mention, the thousands of dollars of annual management fees.

    Whatever it is, I’ll share with all my readers once my UT agent has responded.

    Anyway, thanks Jean 🙂

  5. Nadlique, do share asap any information that u might get from any of the authorised UT consultant. Because i’m one of the unfortunate subscriber of PAIF. They do convince me without doubt saying that itz a syariah compliant fund.
    this is serious 🙁

  6. Sometimes, we need to be aware that out there, honesty is not everybody’s utmost priority. Some will do anything just to ensure that sales are made. That includes empty promises and unrealistic expectations.

    Anyway, I’ll be posting up an entry about this pretty soon.

Trackbacks

  1. […] About a couple of weeks back, I wrote an entry about Public Asia Ittikal Fund’s (PAIF) syariah compliancy status. Read about it here. […]

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