Corporate Financial Management in Facing Tax Changes

 

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Evaluation of Sharia Equity Mutual Fund Investment Performance

1. Compliance with Sharia Principles

• Investments are screened to exclude businesses involving interest (riba), gambling (maysir), and unethical sectors.
• Adheres to Islamic finance guidelines and is overseen by a Sharia supervisory board.

2. Risk and Return Profile

• Sharia equity funds tend to focus on stable, ethical, and less leveraged companies.
• While this may limit exposure to some high-growth sectors, it also reduces risk associated with volatile or debt-heavy firms.
• Performance is often competitive with conventional equity funds, especially in long-term horizons.

3. Benchmark Comparison

• Compared against Sharia-compliant indices (e.g., Jakarta Islamic Index, Dow Jones Islamic Market Index).
• Effective evaluation includes comparing alpha (excess return), beta (market risk), and Sharpe ratio (risk-adjusted return).

4. Sector Allocation and Diversification

• Sharia funds are often overweight in sectors like consumer goods, healthcare, energy, and technology.
• Restricted diversification due to exclusions can lead to concentration risk, but fund managers mitigate it through strategic asset allocation.

5. Fund Manager Performance

• The skills of the fund manager in stock selection, timing, and maintaining Sharia compliance are key performance drivers.
• Past performance, consistency, and transparency should be assessed.

6. Economic and Market Influence

• Performance is sensitive to macroeconomic factors such as oil prices, interest rates (despite avoidance of riba), inflation, and geopolitical risks.
• Global Sharia markets often respond differently to market cycles compared to conventional ones.

7. Cost Efficiency

• Evaluate total expense ratio (TER), management fees, and other costs.
• Sharia funds are generally competitive in fee structures but should be reviewed for long-term net returns.

8. Social and Ethical Impact

• Besides financial returns, Sharia equity mutual funds align with ethical investing goals.
• Attracts investors who seek both halal returns and socially responsible investing.

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