Mumbai: Taurus Asset Management Co. Ltd, which manages Rs213 crore of assets in India, on Wednesday launched a Shariah-compliant equity fund.
Islamic religious law is known as Shariah.
The fund will not invest in industries that earn interest income such as banks, or in companies that promote gambling or sell products such as tobacco and alcohol, the firm said.
The Shariah forbids the use of interest or speculation.
Only one other asset management firm in the country, Tata Asset Management Ltd, offers a similar fund. The Tata Select Equity Fund is deemed to comply with Islamic law, although the fund house doesn’t market it as such.
The Shariah has some specific rules on investments. For instance, investments are barred in companies whose total debt is more than one-fourth of the total assets, or whose interest income exceeds 3% of total revenues.
Taurus is targeting India’s 150 million Muslims, the world’s second largest Muslim population after Indonesia. But the fund house is not sure of the response its so-called ethical fund will receive, especially at a time when the global financial meltdown has shaken equity markets.
“This is unchartered territory,” said Waqar Naqvi, chief executive of Taurus Asset Management. “There is no authentic data to say what’s the size (of the market).”
The Tata Select Equity Fund has Rs42.8 crore of assets under management—a fraction of the Rs20,000 crore managed by Tata Mutual Fund. The fund’s net asset value has shrunk by 58% in the past year, the worst among Tata funds, according to Value Research India Pvt Ltd, a mutual fund research firm.