Islamic Investment Funds

[rocknrolls2]

A company sponsors a 401(k) plan for its participants. The plan is intended to comply with ERISA Section 404© and offers a number of funds as part of the plan's core funds for which the company's investment committee is responsible for selecting fund managers and monitoring their performance and a self-directed brokerage window, through which participants may choose from a universe of several thousand mutual funds.

A participant has written to the plan administrator requesting information on whether any of the plan's existing core funds or any of the mutual funds available through the brokerage window are designed to comply with Islamic law. According to the participant, a fund would be in compliance with Islamic law if it did not include investments in any business manufacturing or serving alcoholic beverages, providing pornography or charging or collecting interest, among other criteria.

Does anyone know of any Islamic based funds or any type of mutual fund that would otherwise satisfy the requirements of Islamic law?

[Guest mjb]

There are some fund families that specialize in PC type investments. Check out Calvert funds which has funds that do not invest in companies in cigarette manufacturing, alcoholic beverages, gambling, etc. I dont know if any fund refuses to invest in companies that are lenders since this is quite generic to profitable public corporations, e.g., credit cards or financing (GMAC is the only profitable entity of GM).

[WDIK]

You might get some additional information from the following website:

http://muslim-investor.com/

[Guest Green92]

Amana Funds got some good press earlier this year for adhereing to Islamic principles and doing well for investors.

AMANX (income fund)

AMAGX (growth fund)

[namealreadyinuse]

Why do this in an ERISA plan? How does this help satisfy the prudence requirement for investments?

[Guest Pensions in Paradise]

Keep in mind that if the plan administrator is going to respond to the participant's request, any costs associated with the time/effort cannot be payed by the plan. Because it is not the plan administrators responsibility to answer these type of inquiries.

And here's a question for the attorneys. If the plan administrator tells the participant that Mutual Fund A complies with Islamic law, but fails to inform the participant about Mutual Fund B (which also complies with Islamic law), does that constitute the rendering of investment advice and therefore take away some of the 404© protection?

My recommendation would be to provide the participant with the prospectus for the core funds, and inform the participant how he/she can research mutual funds in the brokerage window.

[david rigby]

My recommendation would be to provide the participant with the prospectus for the core funds, and inform the participant how he/she can research mutual funds in the brokerage window.

This sentence is too long.

[WDIK]

This sentence is too long.

You ain't seen nothin' yet!

http://www.gavroche.org/vhugo/sentence.shtml

http://www.plainenglish.co.uk/ouch.html

[KED]

I think he meant that the sentence should have ended with giving the prospectus information to the participant and that the participant could proceed from there.

[WDIK]

(None of my colleagues get my sense of humor either.)

[david rigby]

None of my colleagues get my sense of humor either.

Duh!