Further to using an integrity screen within its investment framework since 1996 to weed out companies with questionable business and governance practices, India’s Quantum AMC has reinforced its investing values with the launch of the Quantum Ethical Fund.
“As an individual investor it can be difficult to identify businesses that conduct their operations in a moral, honest and responsible manner and at the same time remain profitable,” said Managing Director I V Subramaniam.
“The investment objective of this fund is to achieve long-term capital appreciation by investing in businesses meeting an ethical set of principles including Shariah, Jainism and other ethical principles encompassing a broad ethical framework,” explained Chief Investment Officer Chirag Mehta.
Jainism, advocating non-violence, is one of India’s three oldest religions – apart from Hinduism and Buddhism.
The open-ended equity fund will benchmark its performance to the NIFTY 500 Shariah Total Return Index and the investment portfolio, of 30 to 50 diversified stocks, will focus on market liquidity and include only companies with an average trading volume of US$1 million daily for last 12 months.
Following an active investment strategy, the fund will exclude the companies involved in Haram activities and also filter out stocks of firms with interest-based debt exceeding 25% of total assets or interest income over 4% of total income.
Other exclusions include outfits involved in leather industries, meat and poultry processing or any form of animal cruelty plus animal testing – including pharmaceutical companies involved in such practices.
Aimed at investors with a longer-term investment horizon of more than three years, “businesses with good governance practices and high integrity are less likely to face regulatory challenges, stakeholder issues and are more likely to be sustainable”.
Within its broad ethical investment framework, the fund is classified as “very high risk” as it will allocate a minimum 80% into equities and related instruments while up to 20% will be invested in compliant debt and money market instruments.
With a minimum INR10 (US$0.12) entry point, initial subscription into this fund closes on the 16th December 2024 and regular operations start on the 26th December 2024.
Despite not obtaining any specific Shariah compliance certification, the Quantum Ethical Fund will nominally be the fourth Islamic fund offered in India – after the Nippon India ETF Nifty 50 Shariah BeES, Tata Ethical Fund and Taurus Ethical Fund.
