Nurturing green shoots

Taurus has launched India’s first actively managed Islamic mutual fund. While the company considers the initiative a success, regulatory hurdles and a lack of domestic legal expertise continue to stunt the growth of Shariah-compliant finance. George W Russell reports from Bangalore

With the world’s third largest Muslim population, exceeded only by those of Indonesia and Pakistan, India ought to be well placed to develop a market for Islamic financial products. However, the first actively managed Islamic mutual fund to be launched in India has negotiated a difficult journey.

Launched in February, the Taurus Ethical Fund invests in a portfolio of more than 25 stocks and other investment products, with 80% invested in equity and equity-related instruments and 20% in money market instruments. India’s only other Islamic mutual fund is the Benchmark Mutual Fund’s Shariah BeES – a passively managed exchange-traded fund that tracks the S&P CNX Nifty Shariah, an index of 40 companies listed on the National Stock Exchange of India that comply with Shariah rules.

The new fund is managed by Mumbai-based Taurus Mutual Fund, which hopes the fund – worth only Rs50 million (US$1.05 million) in its first six months – will top out at about Rs5 billion. The fund, according to Taurus chief executive officer Waqar Naqvi, reflects India’s growing awareness of the Islamic financial industry. Globally, Islamic investments total about US$65 billion, roughly half of which is in mutual funds.

The principles behind the Taurus Ethical Fund are relatively simple: it’s an open-ended fund conforming to Shariah-compliant rules of investment, so its portfolio avoids investment in interest-paying banks and other financial institutions, companies that are involved or invested in the production of pork, tobacco, alcohol and related chemicals or casinos, and certain other fields such as pawnbroking and deferred bullion contracts.