Al Yusr Morabaha & Sukuk Fund
Al Yusr Morabaha & Sukuk Fund Fact Sheet
Investment Policy The fund’s objective is to provide investors with a Sharia-compliant investment for steady capital appreciation with a high degree of capital preservation, superior liquidity and bearing foreign exchange risk. The fund invests in Sukuks and Morabaha (trade finance) transactions executed in accordance with Sahriah principles. Morabaha encompasses the purchase of goods and commodities from approved suppliers against immediate payment & the selling of them to reputed organizations on deferred payment terms thus generating a profit. All the profits are reinvested in the Fund, thus increasing its unit price. The large size of the fund’s collective investment ensures diversification and thus lower risk. The performance of the fund is compared to the Saudi Riyal 6-Months Interbank Bid Rate (SIBID). Market Overview Saudi Arabian Monetary Agency’s (SAMA) Reverse Repo Rate is reasonably related to the Federal Reserve’s (Fed) Target Rate, where the later might be hiked late 2015 early 2016. Outlook of future actions of the Fed is rather related to how medium term inflation and major economies in the globe evolve during this period, namely, the Euro region and China. Both have been experiencing a slowdown in economic activities and the former is still struggling with its debt crisis. Moreover, European Central Bank (ECB) is still continuing quantitative easing program which in effect devalues the euro. The combination of these actions and market conditions would place the Dollar in a very attractive position for investors; however, the US would still need to sustain its recovery. Unemployment is sustaining and is close to nearly full employment, however, inflation remains subdued. In Addition oil prices has significantly dropped during the last quarter in 2014, where the drop produces less inflationary pressure and consequently is helping the drag of inflation globally below central banks targets, Fed, ECB, BOE and China. The drop in oil prices is due to several reasons; point of focus would be where the Saudi government would fund its deficit, given the huge government expenditure. Saudi government has commenced debt issuance late July (Saudi Government Development Bonds – SGDBs) and is continuing ever since then on a monthly basis. Size of issuance is within the range of SAR 20 billion. Expectations that SAMA will continue issuing debt for at least the first half of 2016. Furthermore, the minister of Finance stated that the government will be issuing Sukuk (Sharia’ah compliant debt) as well, however, the later would be related to projects. Monthly issuance of SGDBs drained part of the liquidity the banking sector has been enjoying for quite some time. Consequently deposit rates increased and are expected to keep increasing as long as SAMA is issuing SGDBs. Depending on the banking sector performance and the economy’s evolvement in general SAMA might hike its reverse repo rate in order to support the banking sector, even before the Fed’s long expected hike.
Investment Review Market rates has improved & excess liquidity is being drained from banking system with the issuance of Saudi Government Development Bonds (SGDBs), Saudi Hollandi Capital’s Al-Yusr Morabaha & Sukuk Fund posted returns outperforming its Benchmark (6-Months SIBID) overall. We believe interest rates might increase during the last quarter of 2015 or first half of 2016. This will, in combination with market conditions; alter the fund’s duration & will adjust accordingly.
Fund Characteristics Date of Inception Unit Price at Inception Fund’s Base Currency Fund’s Currency of Exposure Subscription Fee Annual Management Fee Redemption Fee Minimum Initial Subscription Min Required for Additional Subscription or Redemption Price Announcement Day Cut-off Time for Subscription & Redemption Redemption Payment Period from Announcement Day Benchmark
01-Jul-2003 SAR10 Saudi Riyal All Currencies Up to 1% 0.50% 0% SAR 5,000 SAR 2,000 Every Business Day 12 Noon Every day 1 Business Day SAR 6-months SIBID
Key Benefits • • • •
Offers the client Shariah- compliant investment High liquidity High degree of capital preservation Provide Sukuk returns not usually available to individual investors
Investor Profile • Seeking Shariah-compliant investments • Investors with low to medium risk profile • Short to medium term investment strategy
Fund Performance vs. Benchmark* 101.4 101.2 101 100.8 100.6 100.4 100.2 100
Morabaha&Sukus Fund
Benchmark
As of 30 Sep 2015
Fund Performance YTD 1 Year 3 Years 5 Year Since Inception 01-Jul-2003 CAGR (3 Years)
Fund
Benchmark*
Alpha
0.84% 1.19% 3.22% 5.05% 13.87% 1.06%
0.57% 0.79% 2.60% 4.12% 13.22% 0.86%
0.27% 0.40% 0.62% 0.93% 0.65% 0.20%
Asset Allocation
Cash Morabaha Deposits Sukuk Funds Structured Deposits
Glossary Net Asset Value (NAV) Value of an investment fund unit corresponding to the market value of the fund’s assets on a set reference date, minus liabilities and divided by the number of units outstanding. Benchmark Index against which an investment fund’s performance is measured. Also called a reference index. Alpha Alpha measures the difference between a portfolio’s actual returns and its benchmark’s return. A positive alpha means the fund has outperformed its benchmark. A negative alpha means that the fund has underperformed the benchmark. CAGR The year-over-year growth rate of an investment over a specified period of time. The compound annual growth rate is calculated by taking the n th root of the total percentage growth rate, where n is the number of years in the period being considered.
Disclaimer Saudi Hollandi Capital is an authorized person under CMA license number 07077-37. This material is for information purpose only and is not to offer or solicitation to buy or sell any security, enter into any transaction or to participate in any trading activity. This brief statement cannot disclose all the risks and other significant aspects of the markets. Mentioned Figures refer to the past. Past performance is not a reliable indicator of the future results. It should not be assumed that the methods, techniques, or indicators presented herein will be profitable or that they will not result in losses. Investing in SHC funds is not the same as placing deposit with a bank, SHC has no obligation to redeem units at the subscription value of as the underlying net asset value can go down as well as up. SHC funds may invest in equities and therefore be subject to high fluctuations in value. Each fund's performance can deviate substantially from that of its benchmark. Focusing intentionally on individual sectors may entail additional risks. Investors may get back less than he or she originally invested. Fees mentioned in the T&C will be applied. Changes in currency rates may have an adverse effect on the value, price or income of this security. To ensure proper understanding of the fund and its suitability for you according to your risk tolerance, we recommend that you seek a specialized investment advisor. More information about the fund and the risk associated with investing in them are available in the terms and conditions applicable to that fund and should be read carefully before investing. These terms and conditions can be obtained from any of SHC’s Slide 1 branches or SHC’s website. At any time SHC or its affiliates may have a position in the underlying securities or provide significant advice or securities business services to the issuer of those securities.
Investment Policy The fund’s objective is to provide investors with a Sharia-compliant investment for steady capital appreciation with a high degree of capital preservation, superior liquidity and bearing foreign exchange risk. The fund invests in Sukuks and Morabaha (trade finance) transactions executed in accordance with Sahriah principles. Morabaha encompasses the purchase of goods and commodities from approved suppliers against immediate payment & the selling of them to reputed organizations on deferred payment terms thus generating a profit. All the profits are reinvested in the Fund, thus increasing its unit price. The large size of the fund’s collective investment ensures diversification and thus lower risk. The performance of the fund is compared to the Saudi Riyal 6-Months Interbank Bid Rate (SIBID). Market Overview Saudi Arabian Monetary Agency’s (SAMA) Reverse Repo Rate is reasonably related to the Federal Reserve’s (Fed) Target Rate, where the later might be hiked late 2015 early 2016. Outlook of future actions of the Fed is rather related to how medium term inflation and major economies in the globe evolve during this period, namely, the Euro region and China. Both have been experiencing a slowdown in economic activities and the former is still struggling with its debt crisis. Moreover, European Central Bank (ECB) is still continuing quantitative easing program which in effect devalues the euro. The combination of these actions and market conditions would place the Dollar in a very attractive position for investors; however, the US would still need to sustain its recovery. Unemployment is sustaining and is close to nearly full employment, however, inflation remains subdued. In Addition oil prices has significantly dropped during the last quarter in 2014, where the drop produces less inflationary pressure and consequently is helping the drag of inflation globally below central banks targets, Fed, ECB, BOE and China. The drop in oil prices is due to several reasons; point of focus would be where the Saudi government would fund its deficit, given the huge government expenditure. Saudi government has commenced debt issuance late July (Saudi Government Development Bonds – SGDBs) and is continuing ever since then on a monthly basis. Size of issuance is within the range of SAR 20 billion. Expectations that SAMA will continue issuing debt for at least the first half of 2016. Furthermore, the minister of Finance stated that the government will be issuing Sukuk (Sharia’ah compliant debt) as well, however, the later would be related to projects. Monthly issuance of SGDBs drained part of the liquidity the banking sector has been enjoying for quite some time. Consequently deposit rates increased and are expected to keep increasing as long as SAMA is issuing SGDBs. Depending on the banking sector performance and the economy’s evolvement in general SAMA might hike its reverse repo rate in order to support the banking sector, even before the Fed’s long expected hike.
Investment Review Market rates has improved & excess liquidity is being drained from banking system with the issuance of Saudi Government Development Bonds (SGDBs), Saudi Hollandi Capital’s Al-Yusr Morabaha & Sukuk Fund posted returns outperforming its Benchmark (6-Months SIBID) overall. We believe interest rates might increase during the last quarter of 2015 or first half of 2016. This will, in combination with market conditions; alter the fund’s duration & will adjust accordingly.
Fund Characteristics Date of Inception Unit Price at Inception Fund’s Base Currency Fund’s Currency of Exposure Subscription Fee Annual Management Fee Redemption Fee Minimum Initial Subscription Min Required for Additional Subscription or Redemption Price Announcement Day Cut-off Time for Subscription & Redemption Redemption Payment Period from Announcement Day Benchmark
01-Jul-2003 SAR10 Saudi Riyal All Currencies Up to 1% 0.50% 0% SAR 5,000 SAR 2,000 Every Business Day 12 Noon Every day 1 Business Day SAR 6-months SIBID
Key Benefits • • • •
Offers the client Shariah- compliant investment High liquidity High degree of capital preservation Provide Sukuk returns not usually available to individual investors
Investor Profile • Seeking Shariah-compliant investments • Investors with low to medium risk profile • Short to medium term investment strategy
Fund Performance vs. Benchmark* 101.4 101.2 101 100.8 100.6 100.4 100.2 100
Morabaha&Sukus Fund
Benchmark
As of 30 Sep 2015
Fund Performance YTD 1 Year 3 Years 5 Year Since Inception 01-Jul-2003 CAGR (3 Years)
Fund
Benchmark*
Alpha
0.84% 1.19% 3.22% 5.05% 13.87% 1.06%
0.57% 0.79% 2.60% 4.12% 13.22% 0.86%
0.27% 0.40% 0.62% 0.93% 0.65% 0.20%
Asset Allocation
Cash Morabaha Deposits Sukuk Funds Structured Deposits
Glossary Net Asset Value (NAV) Value of an investment fund unit corresponding to the market value of the fund’s assets on a set reference date, minus liabilities and divided by the number of units outstanding. Benchmark Index against which an investment fund’s performance is measured. Also called a reference index. Alpha Alpha measures the difference between a portfolio’s actual returns and its benchmark’s return. A positive alpha means the fund has outperformed its benchmark. A negative alpha means that the fund has underperformed the benchmark. CAGR The year-over-year growth rate of an investment over a specified period of time. The compound annual growth rate is calculated by taking the n th root of the total percentage growth rate, where n is the number of years in the period being considered.
Disclaimer Saudi Hollandi Capital is an authorized person under CMA license number 07077-37. This material is for information purpose only and is not to offer or solicitation to buy or sell any security, enter into any transaction or to participate in any trading activity. This brief statement cannot disclose all the risks and other significant aspects of the markets. Mentioned Figures refer to the past. Past performance is not a reliable indicator of the future results. It should not be assumed that the methods, techniques, or indicators presented herein will be profitable or that they will not result in losses. Investing in SHC funds is not the same as placing deposit with a bank, SHC has no obligation to redeem units at the subscription value of as the underlying net asset value can go down as well as up. SHC funds may invest in equities and therefore be subject to high fluctuations in value. Each fund's performance can deviate substantially from that of its benchmark. Focusing intentionally on individual sectors may entail additional risks. Investors may get back less than he or she originally invested. Fees mentioned in the T&C will be applied. Changes in currency rates may have an adverse effect on the value, price or income of this security. To ensure proper understanding of the fund and its suitability for you according to your risk tolerance, we recommend that you seek a specialized investment advisor. More information about the fund and the risk associated with investing in them are available in the terms and conditions applicable to that fund and should be read carefully before investing. These terms and conditions can be obtained from any of SHC’s Slide 1 branches or SHC’s website. At any time SHC or its affiliates may have a position in the underlying securities or provide significant advice or securities business services to the issuer of those securities.
