Funds aim to address a recognised need of members who would like a wider choice of Shariah compliant investment options.
Legal & General (‘L&G’) has today announced the launch of a new Islamic Investment Proposition, aiming to address a recognised need for Muslim members to have a wider choice of Shariah-compliant investment options.
Today’s announcement follows research published by L&G last year, which found a significant disparity in pension saving amongst ethnic minorities and identified a number of barriers to entry. This included a 54% ethnicity pensions gap between minority ethnicities and white British DC pension savers in the UK. By expanding the range of investment opportunities open to members, L&G views this launch as one way of encouraging pension savings among communities which may otherwise choose not to do so as a way to fund their retirement.
The L&G Islamic Investment Proposition aims to address one significant barrier to saving for the UK’s Muslim population who will be able to make use of the many benefits of pension saving, including contributions from their employer, and improve adequacy of income in later life. The proposition provides a selection of investment options which satisfy different appetites for risk. Offering a lifestyle glidepath option, the proposition aims to address the changing needs of savers as they approach and move into retirement and, with additional self-select funds, it can do this within a framework that incorporates access to a range of Shariah-compliant investments.
The funds within the proposition will be managed by HSBC Asset Management (HSBC AM), a recognised asset manager for Shariah-compliant investing. L&G has selected HSBC AM on account of the firm’s track record and experience in serving Islamic investors globally. Their team includes in-house scholars who are experts in Shariah law as applied to finance, along with robust governance processes such as a Global Shariah Supervisory Committee, who monitor the funds.
Shariah-compliant investing aims to grow investors’ money while fulfilling the principles of the Islamic faith and adhering to Shariah law. For example, the funds will only invest in companies that meet Shariah-compliance principles as interpreted or approved by the Shariah Committee. They will exclude shares of companies that generate more than 5% of income or revenue from the business activities such as alcohol, tobacco, pork-related products, conventional financial services, weapons and defences, as well as certain entertainment.
The L&G Islamic Lifestyle Profile, which incorporates a ready-made and L&G designed investment glidepath, will invest in underlying funds the L&G Islamic Growth Fund and the L&G Islamic Retirement Fund bringing together a range of asset classes and risk profiles managed by HSBC AM with the asset allocation adjusted to prepare for retirement, depending on how far the member is from their selected retirement age. The proposition will be rolled out to clients and members in the coming months.
The L&G Islamic Growth Fund is designed for members 10 years or more away from their selected retirement age, aiming to achieve capital growth over the long term. Members nearing retirement in the next 10 years or less will gradually transition to the L&G Islamic Retirement Fund, which aims to strike a balance between managing risk, while continuing to provide long-term capital growth. Both funds will invest in a variety of asset classes including, but not limited to, equities and Sukuk instruments (Islamic bonds).
Jesal Mistry, Head of DC Investments Governance and Proposition, Legal & General: “While the pensions market has begun to have the conversation around the ethnicity pensions gap, much more needs to be done. L&G has a strong track record of developing innovative solutions to improve the outcomes of our members and we’re pleased to build on our track record by bringing this Islamic Investment Proposition to market.
“HSBC AM’s Shariah-compliant investment expertise, combined with L&G’s scale and expertise in serving over 5.3 million DC members, will enable us to help address a critical gap in the UK pensions market and significantly broaden access to Shariah compliant DC solutions.”
Alongside the L&G Islamic Lifestyle Profile, L&G is also providing access to three self-select Shariah-compliant investment funds for members who want to manage their pensions more actively. This option offers a flexible retirement solution, allowing members to pick funds that enable drawdown during retirement. These are the L&G PMC HSBC Islamic Global Equity Fund 3, L&G PMC HSBC Islamic Multi Asset Fund 3 and the L&G PMC HSBC Islamic Sukuk Index Fund 3.
Olga de Tapia, Global Head of ETF and Indexing Sales, HSBC Asset Management: “We are pleased to partner with L&G to provide investors with a range of Shariah compliant investment solutions. Ensuring faith based investors have the same range of investment opportunities as their conventional counterparts is extremely important, and we are proud of the fact that we are able to help individuals invest in a way that is commensurate with their principles.”
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