A Shariah-based unit trust fund is a collective investment fund that offers investors the opportunity to invest in a diversified portfolio of Shariah-compliant shares and fixed-income securities as well as other Shariah-compliant money market instruments.
A typical structure of a Shariah-based unit trust fund consists of:
· A manager - who handles the investment and operations of the fund
· A trustee - who protects the rights and interests of the unit holders
· The unit holders - who are investors entitled to a proportionate interest in the fund’s assets
The Shariah-compliant instruments, particularly the Shariah-compliant securities (shares), are the main source of investment for the Shariah-based unit trust fund.
The investment objectives of Shariah-based unit trust funds vary according to the type of fund. It determines the riskiness of a fund and the kind of investor the fund is targeting.
The types of funds are as follows (not limited to this type only):
Income funds
· Invests in Islamic fixed income securities and huge dividend-yielding Shariah-compliant shares, with a view to pay out most of the returns
· Suitable for investors with low-risk appetite, seeking income with some level of growth
Capital growth funds
· Invests in Shariah-compliant shares, with a view to maximise capital growth over the long-term (i.e. through a higher unit price)
· Suitable for investors with high-risk appetite and are keen on capital accumulation
Aggressive growth funds
· Similar to capital growth funds but with investments in aggressive, fast track Shariah-compliant shares that promise high returns, but with higher risk
· Suitable for investors with high-risk appetite
Balanced funds
· Three main objectives: income; moderate capital appreciation; and capital preservation
· Invests across a broad range of asset categories including Shariah-compliant shares, Islamic fixed income securities and cash
· Well-diversified and suitable for investors seeking reasonably safe investments where the risks are lower and which produce average returns
Index funds
· Invests in a basket of Shariah-compliant shares to track the performance of a selected stock market index
· Suitable for investors seeking medium to long-term capital appreciation
Bond funds
· Invests in Islamic fixed-income securities such as Islamic bonds and short-term money-market instruments
· Suitable for investors seeking greater security in the form of capital preservation and income with minimal risk
Source: MIFC
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Islamic unit trust consultant/Islamic financial planner
Ahmad Sanusi Husain - WA/SMS: 6019 234 8786
CIMB Wealth Advisors (CWA), Kuala Lumpur
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