Islamic superannuation funds in Australia are emerging as competitors to the major players in the growing finance and investment sector. Contributing to their growth is an influx of non-Muslim investors.
After two years of investing his retirement money in one of Australia’s major superannuation funds, Mohamed Mahmoud decided to make a switch.
The 35-year-old computer science engineer, who immigrated to Australia from Egypt four years ago, said his decision was driven by a desire to invest in a fund that was more aligned with his cultural values and principles.
“I was looking for an Islamic [super fund] because I know that most of the super funds here in Australia maybe invest in gambling, banks or arms manufacturers, which I believe is unethical.”
A year ago, he transferred his money to a ‘Sharia-compliant’ superannuation fund, which are governed by Islamic principles and considered a type of “socially responsible” form of investing.
He also persuaded his wife to put her money in the same fund. Their switch is proving to be popular routes as Islamic funds continue to grow internationally.
The Australian landscape
Australian superannuation funds are among the largest investment funds in the world, managing around $2.9 trillion, according to June figures by the Association of Superannuation Funds of Australia (ASFA).
Australia’s superannuation funds are expected to grow by 170 per cent over the next 10 years to $6 trillion.
Consequently, competition is growing among funds to attract new customers, and recently, Sharia-compliant funds have emerged as worthy competitors.
Market share and non-Muslim investment
Islamic fund Hejaz Financial Services has been growing in size since it began operating in 2014.
In 2015, the fund managed 143 customers, before growing to 1323 by 2017. The fund currently manages the funds of more than 4000 people, an amount in the range of $155 million.
Hejaz operations manager Muzzammil Dhedhy said the fund’s growth can be attributed to many factors, including increased awareness and the uncovering of superannuation abuses during the Royal Commission into the banking sector.
“In the past, no one knew where their investments were going, and whether their investments went to the arms industry or to cigarette companies,” he said.
“Many Muslims and non-Muslims said they did not want to be associated with these [abuses].
“10, 20 and 30 years ago, people may not have been aware of the fact that if for example my super was being invested into a company that indirectly supported the military, or indirectly supported tobacco, or gambling or whatever.
“A lot of Muslims and non-Muslims were shaken up by that. They say ‘how can you engage in such practices, and how can I even support you engaging in such socially unacceptable practices.”
More than two-thirds of subscribers in Hejaz’s superannuation savings fund, called the Global Ethical Fund, were male, and with an average age of 35. Furthermore, 25 per cent were non-Muslims.
Mr Dhedhy said the fund was able to attract such a high number of non-Muslim customers due to its ability to “distribute its investments well and ethically”.