john a. sandwick manager, safa investment services - islamic wealth & asset management s.a
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John A. Sandwick Manager, Safa Investment Services - Islamic Wealth & Asset Management S.A . Sharia-compliant global asset allocation. Riyadh, Saudi Arabia In technical cooperation with Islamic Wealth & Asset Management S.A. Geneva, Switzerland April 2013. About Safa Investment Services. - PowerPoint PPT PresentationTRANSCRIPT
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John A. SandwickManager,
Safa Investment Services - Islamic Wealth & Asset Management S.A.
Sharia-compliant global asset allocation
Riyadh, Saudi Arabia
In technical cooperation with
Islamic Wealth & Asset Management S.A.Geneva, Switzerland
April 2013
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About Safa Investment Services
• The Investor for Securities Co. (“The Investor”), founded 2007, licensed by Saudi Capital Market Authority
• SAR 7 billion AUM (about CHF 1.8 billion), mostly local real estate funds
• Over 800 domestic Saudi clients
• Leading Saudi investment company, over 40 staff, Riyadh based
• Just bought position in Islamic Wealth & Asset Management S.A.
• IWAMSA owns the Safa brand, franchised to The Investor
• The Investor expanding into liquid asset management, Safa Investment Services
• Target market is awqaf (Islamic endowments), takaful (Islamic insurance), private clients
• Large potential market
• Entirely sharia compliant, bottom-up fatwa
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Islamic asset management
• Same professional rules as conventional asset management industry
• Strict filtering, sorting and qualification of all assets
• Only “best of class” assets allowed
• Asset allocations fully optimized using advanced asset allocation software
• Superior results from professional asset management
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The Islamic investment universe
SHARIA-COMPLIANT FUND BUY LIST
Asset Class Count AUM
Money Market 17 $4.7 billion
Sukuk 60 $2.4 billion
Trade Finance 15 $9.6 billion
Equities 209 $14.3 billion
Precious Metals 12 $18.2 billion
Real Estate 9 $2.5 billion
Special Strategy 59 $1.3 billion
Total 381 $53.1 billion
There are more than 800 sharia-compliant funds and ETFs in the world today with over $100 billion Assets Under Management (AUM).
Must filter & sort these >800 funds and ETFs, then means-variance test to create a proprietary Buy List:
• More than $50 million AUM• More than 2-year track record• Less than 30-day liquidity• Acceptable legal jurisdiction• Transparent, timely reporting• Direct access to managers• Fatwa from one or more of the major
sharia scholars
Qualifying Islamic sub-universe has over$50 billion Assets Under Management.
Construct portfolio allocations among the“best of class” funds on a proprietary Buy List.
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Asset allocation, hypothetical Balanced strategy
ASSET CLASS % OF TOTAL
Murabaha & trade finance 5%
Sukuk & trade finance 45%
Global equities 35%
Alternative Investments 15%
1. Above is identical to conventional, but entirely sharia-compliant Balanced allocation2. Muslims require performance equal or superior to conventional allocations, but with full respect for sharia3. All investible assets must be from professional Buy List4. Allocations must meet global professional asset management standards, but also strict sharia standards
5%
45%
35%
15%Murabaha & Trade Finance Funds
Fixed Income (sukuk & trade finance) Funds
Equity Funds
Alternative Investment Funds
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Historic performance
Performance measured 1/1/08 to 31/1/13 Portfolio Performance vs. 50% ML Bonds/50% MSCI Equities
USD global balanced investing comparables Annualized Return Cumulative Return Annualized Excess Return Cumulative Excess Return
Balanced Islamic Portfolio USD 4.39% 24.42% 0.81% 4.82%
Julius Baer Strategy Balanced USD B 0.63% 3.22% -2.96% -16.37%
BlackRock Global Allocation A2 USD 0.86% 4.43% -2.73% -15.17%
Credit Suisse Portfolio Fund Balanced USD B 0.49% 2.54% -3.09% -17.06%
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Risk & return
Risk & return variables measured 1/1/08 to 31/1/13 Standard Deviation Sharpe Ratio
Balanced Islamic Portfolio USD 7.03% 0.56Julius Baer Strategy Balanced USD B 9.18% 0.02
BlackRock Global Allocation A2 USD 11.84% 0.04
Credit Suisse Portfolio Fund Balanced USD B 11.49% 0.00
50% Merrill Lynch Global Bonds/50% MSCI Global Equities 12.18% 0.26
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Drawdown
Drawdown measured 1/1/08 to 31/1/13 Max. Drawdown Max. Drawdown Begin Date
Max Drawdown Recovery Length Pain Index Gain-to-Loss Ratio
Balanced Islamic Portfolio USD -16.29% May-08 16 3.56% 0.99
Julius Baer Strategy Balanced USD B -26.19% Jan-08 26 7.62% 0.87
BlackRock Global Allocation A2 USD -27.10% Jun-08 23 8.46% 0.77
Credit Suisse Portfolio Fund Balanced USD B -28.27% Jun-08 24 8.84% 0.91
50% Merrill Lynch Global Bonds/50% MSCI Global Equities -29.04% Jun-08 19 5.90% 0.91
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Return distribution
Measured 1/1/08 to 31/1/13 Omega MAR = 0%
Upside OmegaMAR = 0%
Downside OmegaMAR = 0% Zephyr-K Ratio
Balanced Islamic Portfolio USD 1.63 0.98% 0.60% 13.4
Julius Baer Strategy Balanced USD B 1.09 1.02% 0.93% 5.30
BlackRock Global Allocation A2 USD 1.1 1.39% 1.26% 5.08
Credit Suisse Portfolio Fund Balanced USD B 1.08 1.33% 1.23% 4.27
50% Merrill Lynch Global Bonds/50% MSCI Global Equities 1.31 1.52% 1.16% 8.59
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Omega
Periodic returns
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Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Balance
d Islamic Portfoli
o USD
2013 0.87% - - - - - - - - - - - 0.87%
2012 4.07% 1.67% 0.34% -0.55% -3.10% 0.84% 0.61% 1.38% 1.47% -0.84% -0.21% 0.65% 6.34%
2011 0.01% 0.19% 2.18% 2.33% -0.64% -0.32% 0.36% -1.66% -3.56% 3.09% -1.34% 0.91% 1.36%
2010 0.33% 1.17% 3.17% 1.22% -3.52% 1.58% 0.71% 1.42% 3.03% 0.90% -0.18% 3.39% 13.84%
2009 -1.12% -1.21% 1.54% 2.71% 3.33% 0.67% 0.88% 0.70% 2.05% 1.84% 1.52% -0.32% 13.24%
2008 -0.02% 1.91% -0.87% 2.27% -0.83% -0.80% -0.68% -3.24% -4.40% -6.71% -0.71% 2.65% -11.23%
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Contacts
For more information, Saudi Arabia:
Safa Investment ServicesThe Investor for SecuritiesAljomaiah Towers, King Fahd RoadP.O. Box 67838Riyadh 11517, Saudi ArabiaTelephone: +966 (1) 200-7002 x 182e-mail: [email protected]
For more information, Switzerland:
Safa Investment ServicesIslamic Wealth & Asset Management S.A.1204 GenevaSwitzerlandTelephone: +41 (79) 642-2304e-mail: [email protected]