Market offers scope for better return for Shariah-compliant pooled fund

Sandhani Asset Management is set to launch a Shariah-compliant mutual fund (MF), namely Sandhani AML SLFL Shariah Fund, amid a dire strait in the capital market, considering the lucrative prices of listed securities.

The company believes that purchasing fundamentally strong stocks at attractive valuations would secure a good profit margin for disciplined investors.

Ariful Islam, managing director & CEO of Sandhani Asset Management, said this in an interview with the FE.

"Low price levels of listed securities allow accumulation of quality assets at attractive valuations, which often benefits investors over the next market cycle," Islam said.

Historically, strong portfolios were built during periods of market stress.

"Many fundamentally sound companies are currently trading below intrinsic value. For disciplined investors, this presents an opportunity," Islam said.

An economy cannot rely solely on bank-based intermediation for long-term growth.

Shariah-compliant capital market products-particularly mutual funds-bridge this gap as they allow faith-based investors to participate in equity and Sukuk markets in a structured and transparent manner.

Disciplined investors prefer Shariah-compliant MFs as they invest strictly in halal, Shariah-approved instruments-such as Shariah-compliant equities, Sukuk, and Islamic money market instruments.

Shariah-oriented investors now have access to several instruments, such as Islamic bank deposits and Mudaraba savings schemes, Bangladesh Government Investment Sukuk (BGIS) and corporate Sukuk, listed Shariah-compliant equities, and IPOs (initial public offerings).

"Among these instruments, Shariah-based MFs are unique because they combine diversification, liquidity, capital market exposure, and governance within a single investment vehicle," said the managing director of Sandhani Asset Management.

Conventional MFs have been struggling to generate returns over the last few years, mainly because of the persistent falling trend of the equity market.

Also, the Shariah mutual fund segment is still relatively small but growing steadily.

Currently, around 17 asset management companies manage approximately 20 Shariah-compliant mutual funds, with total assets under management close to Tk 10 billion.

So, the question regarding the viability of a new Shariah-compliant fund with a limited investment scope compared to a traditional fund could be raised.

Islam said Shariah mutual funds might lag behind conventional funds during aggressive market rallies because of investment restrictions and disciplined screening.

"But Shariah funds have historically delivered competitive risk-adjusted returns over the medium to long term."

He said, importantly, that Shariah mutual funds generally outperformed most other Shariah-compliant instruments, such as bank deposits, by offering equity exposure and long-term capital growth.

"Their lower leverage and focus on financially sound companies also help reduce downside risk during volatile market phases," said the managing director of Sandhani Asset Management.

He said the ecosystem of Shariah-compliant instruments has matured over time, with the launch of the first Shariah-compliant MF in 2010.

"Today we see better governance, stronger disclosure standards, improved regulatory frameworks, and more structured Shariah supervision," Islam said.

The Commercial Bank of Ceylon has been appointed as the custodian of the fund, while Bangladesh General Insurance Company Limited (BGIC) is acting as the trustee.

The public subscription for the Sandhani AML SLFL Shariah Fund will remain open from February 1 to April 12.

Sandhani Asset Management already has a fixed-income fund launched in 2022.The fund delivered a 13.5 per cent return in 2025, with a three-year CAGR of approximately 9 per cent.

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