Nicholas Kaiser's Amana Income Fund is
outperforming the U.S. stock market this year by following the laws of the
Koran. Managed in compliance with Islamic principles known as sharia law, the
fund was the best performer of 19 U.S. mutual funds tracked by Bloomberg that
are governed by social or religious principles.
The fund can't own shares of financial
institutions such as banks that charge interest. Banking stocks are trailing the
Standard & Poor's 500-stock index in 2005. Energy stocks, the benchmark's
top performers, aided by record oil prices, are among its largest
holdings.
"Under the current circumstances, the
restricted selection helps us to look for good stocks," Kaiser, 59, said from
his office in Bellingham, Wash. The $41.6 million fund owns shares of Exxon
Mobil Corp. and BP PLC, the world's two largest publicly traded oil
companies.
Amana Income, named for an Islamic term
meaning "to have faith," gained 25 percent in the past 12 months, almost triple
the S&P 500's 9 percent return.
The assets of the Amana Income Fund and
the Amana Growth Fund, also run by Kaiser, increased 64 percent in the 12 months
ended May 31 to a combined $95 million. The growth fund climbed 24 percent in
the past year.
Inflows into so-called socially
responsible funds rose 40 percent faster than net investments in professionally
managed funds between 1995 and 2003, according to a study released by the Social
Investment Forum, a Washington-based trade group. Updated figures are due in
November.
"There is still very strong interest in
socially responsible investing," said Amy Domini, chief executive of Domini
Social Investments LLC in New York. Her firm oversees the Domini Social Equity
Fund, the category's largest, with $1.26 billion in
assets.
Kaiser, a Bellingham native, doesn't
practice Islam, has never been to the Middle East and doesn't speak any Arabic.
Kaiser said he was approached in 1984 by the North American Islamic Trust, a
Burr Ridge, Ill., group that oversees assets of the Islamic Society of North
America, the Muslim Students Association of the United States and Canada, and
other organizations.
"I had no idea about Islamic funds then,"
he said.
Two years later, after working with the
trust's directors and scholars to form an investment strategy based on Islamic
law, he helped start the Amana Mutual Trust Fund.
He screened 3,700 companies at the
direction of Fiqh Council of North America in Leesburg, an advisory board of the
Islamic Society. About 45 percent passed.
Aside from a six-month break in 1989,
Kaiser has managed the Amana funds since then. Some of his own money is invested
in the funds, advised through Saturna Capital Corp., a firm he founded in
1989.
