CASE STUDY

Shariah-compliant Global Equity

Middle Eastern Asset Manager | 2021

Engagement at a glance

Client Country/Type: Middle Eastern Asset Manager
Year: 2021
Asset Class: Shariah-compliant Public Equity
Mandate Size: USD 30 million (across 2–4 managers)
Mandate Geography: Global
Mandate Type: Pooled funds
Service Provided: Manager selection
Investment Objectives: 2% p.a. (gross) outperformance over a market cycle

Shariah Compliant Global Equity

 

Client-specific concerns

The client, a prominent Middle Eastern asset manager, was seeking to invest in Shariah-compliant global and broad regional equity strategies—irrespective of investment style—to play a satellite role within its newly launched global growth fund.

At the outset of this search, the asset manager indicated that it wanted to find a handful of active managers to provide the alpha, or outperformance, necessary to complement the passive core allocation of its new, listed fund product focused on global growth. The manager also expressed strong preferences regarding minimum fund size (to mitigate client concentration risk) minimum record length (three years) and flat fees. Additionally, the client required bfinance to highlight non-domestic global equity managers that could offer a compelling Shariah-compliant proposition.

Outcome

  • Defining the manager universe: the bfinance team conducted a deep search for pooled funds that met the client’s minimum mandate requirements, leveraging proprietary market research and multiple third-party data sources. Despite the somewhat narrow universe, bfinance was able to invite 78 managers to participate.

  • Adjusting requirements to provide wider choice: although the client was well versed in local managers, bfinance helped it recalibrate its search parameters throughout the process and seek out a wider pool of non-domestic asset managers. The bfinance team also conducted a targeted reengagement of larger asset managers, which facilitated increased participation and expanded the range of 'globally recognised' manager names without impacting project delivery.

  • Assessing sources of alpha: the client was open to all investment styles, and so—to avoid ‘apples-to-oranges’ comparisons—bfinance sought to understand the key drivers of alpha for each strategy independently.

 

Our specialist says

  • This manager search exercise on behalf of a Middle Eastern asset manager was a testament to prior bfinance efforts to define and explore the independent Shariah manager landscape—ensuring good participation from a tight universe of Shariah-compliant pooled funds. Despite the smaller pool of managers, the client was still afforded the flexibility to customise requirements throughout the process. Unique to the project (and necessary, given the complexity the client’s investment vehicle), bfinance supported the implementation of the funding stage, facilitating continuous dialogue between the chosen managers and the client.

}