What is sukuk Fund?
Sukuk (Islamic bond or “Sharia-compliant” bond) is an Islamic financial certificate that represents a portion of ownership in a portfolio of eligible existing or future assets. Then, the issuer uses the proceeds from the certificates to purchase the asset, and investors receive partial ownership of the asset.
How does a sukuk work?
Unlike a conventional bond (secured or unsecured), which represents the debt obligation of the issuer, a sukuk technically represents an interest in an underlying funding arrangement structured according to sharia, entitling the holder to a proportionate share of the returns generated by such arrangement and, at a …
Is it safe to invest in sukuk?
Investing in sukuk is suitable for all market conditions, as it helps to manage your portfolio risk and provide diversification. But in times of economic volatility – such as the present – having sukuk in your portfolio can be especially useful.
Who can buy sukuk?
Eligibility
- Individual customers with total net personal assets exceeding Ringgit Malaysia Three Million (RM3,000,000) or its equivalent in foreign currency.
- Companies with total net assets exceeding Ringgit Malaysia Ten Million (RM10,000,000) or its equivalent in foreign currency, based on the last audited accounts.
How is sukuk price calculated?
The general concept of pricing in sukuk is similar to bonds. Sukuk is using time value of money where the present value is the price of sukuk while sukuk will be redeemed at future value or face value at maturity and yields income. The coupon will determine whether the yields incomes are fixed or variable.
What are the advantages of sukuk?
Sukuk can play an important part in the development of an Islamic market and banking system. The main advantage of sukuk is to comply with Sharia while boosting the standard of living in Islamic society and developing these societies’ economies.
Can you lose money on sukuk?
The corporate Sukuk rate consists of the risk-free rate plus some spread. Falling interest rates may result in a decline in both the risk-free rate and spread to the risk-free rate, and hence a double whammy for driving prices higher.
Is sukuk debt or equity?
In theory, sukuk represent a form of equity as they represent certificates conferring ownership to holders of an asset or pool of assets or claim to its cash flows. In practice, they have become known as Islamic bonds with their investors holding debt.
What is the risk of sukuk?
There were eight risk factors presenting the relationship of those risks and types of Sukuk: credit risk, rate of return risk, foreign exchange risk, price risk, liquidity risk, business risk, Shariah compliance risk and infrastructure rigidities.
Are sukuk guaranteed?
However, with sukuk, the initial investment isn’t guaranteed; the sukuk holder may or may not get back the entire principal (face value) amount. That’s because, unlike conventional bond holders, sukuk holders share the risk of the underlying asset.
Which is the best UCITS fund for sukuk?
This UCITS Fund complies with the strict European regulatory standards that emphasise strong investor protection and robust risk management framework. The Fund seeks to maximise total return over the medium to long term through a combination of capital growth and income by investing in global Sukuk.
Can a sukuk be used as an investment vehicle?
Fast forward to current times, and sukuk are used by Islamic corporations and state-run organizations alike, taking up a large share of the global bond market. Islamic law prohibits what’s known as ” riba ,” or interest. Therefore, traditional, Western debt instruments cannot be used as investment vehicles.
What does sukuk stand for in Islamic finance?
What is a ‘Sukuk’. A sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia — Islamic religious law.
Which is the best description of a sukuk?
Understanding Sukuk. Thus, sukuk represent aggregate and undivided shares of ownership in a tangible asset as it relates to a specific project or a specific investment activity. An investor in a sukuk, therefore, does not own a debt obligation owed by the bond issuer, but instead owns a piece of the asset that’s linked to the investment.