|Islamic Fund Star|
|Friday, 22 January 2010|
Nicholas Kaiser isn't the sort of guy you'd expect to sit atop the world's largest group of mutual funds run in accordance with Islamic investing principles. Raised in an Anglican household, the 63-year-old Bellingham, Wash. native earned an M.B.A. from the University of Chicago and spent more than a decade running money for an Indianapolis firm before taking even a glance at sharia finance.
Then, in 1984, an Islamic group asked Kaiser to create a fund that met the needs of Muslim investors--meaning one that shunned shares in firms involved with alcohol, tobacco, gambling, pork or pornography. Debt financing, another taboo of Islam, cannot be avoided entirely, but it was certainly possible to stay away from the most debt-ridden firms.
"They said they'd teach me, and we were off," Kaiser says.
Now situated in his hometown, Kaiser's three Amana mutual funds boast $2.6 billion in assets and some very impressive performance numbers over the past decade. (The name Amana means "trust" in Arabic.) Amana Trust Income is the oldest of the group, with $1 billion in assets. Kaiser has loaded it with stalwart domestic dividend payers, like Pfizer ( PFE - news - people ) and Johnson & Johnson ( JNJ - news - people ). It returned 6% annually in the decade through December. That was 6.5 percentage points better than the S&P 500 and good enough to put Amana Trust Income in the top 5% of its category, according to Morningstar.
Kaiser's biggest fund, $1.5 billion Amana Trust Growth, likes big U.S. firms with nice-looking balance sheets, like Apple ( AAPL - news - people ) and Google ( GOOG - news - people ). It has returned 3.4% a year and bested the S&P 500 by four percentage points a year during the same time frame. No surprise that Kaiser has attracted many infidels to Amana over the years; he estimates that only one-fourth of the funds' investors are Muslim.
"Advisors who have sold the funds to clients don't care about the religious aspect," says David Kathman, a Morningstar analyst. "They're going after the great performance."
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