More glow for Shariah retirement funds if gold price continues to record highs

• Commodities dominate Shariah retirement AuM totals, equities ace on gains
• Gold the star of this emerging asset class with bullion prices recording highs  
• Success of Turkish gold funds could be a model to democratize pensions funds sector  

Overview

Shariah compliant retirement funds are emerging as a distinct asset class of their own as Muslim seniors increasingly look at faith-aligned investment options for their nest eggs.

And commodities, led by gold, is the choice asset of these investors.

Of the nearly 250 Shariah retirement funds tracked by the IFN Investor Funds Database at the end of Q2 2025, less than 5% were commodity funds. Yet, they accounted for almost 70% of AuM by total value.

That contribution could get bigger in the coming year, largely for one reason: gold.

Since 2025 began, trading in gold has hit one record high after another – nearing US$4,000 an ounce as at early October 2025, from a 2024 finish beneath US$2,700.

The price explosion comes as central banks buy gold bullion by the tonnes to diversify their cash reserves.

Various fund managers to mom-and-pop investors have also been dipping into the precious metal for its ability to deliver bountiful returns, adding to its appeal as a safe-haven primarily to hedge against currency weakness and political and economic troubles.

If the rally in gold resumes – Goldman Sachs, at least, is optimistic of it reaching US$5,000-an-ounce pricing by 2026 – it could be a boon for the commodities funds that serve Muslims investing for retirement.

AuM breakdown

Historically, the promise of Shariah retirement funds has been to provide faith-based economic empowerment, allowing Muslims to save ethically without resorting to interest-bearing instruments.

The challenge is to leverage that trust to encourage asset diversification.

As of Q2 2025, the asset concentration in the Shariah retirement space was striking: commodities accounted for 68.5% of total AuM.

The commodity-centric asset base was likely driven by a cultural preference for gold as a hedge against inflation and currency risk. It was particularly evident in Turkiye, where people are known to prefer keeping gold “under the pillow” – as a form of savings – than cash in the bank.

For most investors in this sector, the retirement vehicle is less about asset allocation and more about a safe, segregated store of value that hedges against inflationary pressures.

Chart 1: Shariah retirement funds by asset class, fund count and value

The IFN Investor Funds database tracked 248 retirement funds with total AuM of US$15.73 billion as at the end of H1 2025. Of these, 11 were commodity funds, valued at US$10.77 billion. To break it down further, four were pure gold plays.

Mixed assets represented the largest number of funds – at 94 – with an asset base of US$1.81 billion.

Equities were ranked third, with 56 funds worth US$1.11 billion. Yet, they were first with returns. In fact, four of the top five performers in the retirement space were funds specializing in Halal stocks.

Thus, the paradox of Shariah retirement is this: Assets are piled in gold, while alpha – or absolute return – is found in equities.

Sukuk-invested funds numbered 27, with a joint AuM of US$1.05 billion. There were also 27 fixed income funds that did not carry the Sukuk classification, valued at US$308.6 million.

Unspecified Shariah retirement funds, numbering 13 and with a merged AuM of US$496.12 million, made up the rest of the mix.

Geographical spread

The map for Shariah retirement is highly imbalanced. Europe holds US$14.25 billion of the total, a figure anchored by Turkiye's US$13.47 billion.

Chart 2: Shariah retirement funds by country and fund count

While Asia Pacific has an equal number of funds (123), their collective AuM is only US$970 million, revealing that the non-European funds are significantly smaller in scale. The Pakistan market, for instance, has 63 funds but only US$401.23 million in total AuM.

The biggest promise for the future is to successfully export the model's structure to high-growth regions like the Asia Pacific (US$970 million) and Africa (US$510.06 million).

Chart 3: Shariah retirement funds by region

Investment performance

Despite the conservative asset allocation of the largest funds, the sector has delivered strong returns since the start of the year.

The three-month performance at end-June 2025 highlights the potential for high alpha, with two global equity index funds under the Aegon brand posting returns of 19.5% each.

Table 1: Shariah retirement funds ranked by three-month returns

In contrast, the most-capitalized fund remains the US$3.8 billion Turkish Gold Participation Retirement Investment, which suggests a prevailing investor philosophy that prioritizes capital preservation via gold over the pursuit of aggressive equity returns.

This dichotomy reflects a market where the largest pool of capital is highly risk-averse, even as the highest-performing products are equity-focused.

Table 2: Shariah retirement funds ranked according to AuM

Outlook

The Turkish market's success in mobilizing participation capital into gold-linked funds provides a template for growth. The challenge, however, is asset diversification.

To grow, the sector requires a harmonized global framework that can allow a higher-returning equity fund to seamlessly attract capital from the 63 funds in Pakistan or the 59 funds in Malaysia.

The outlook is for gradual growth, fueled by the professionalization of the smaller Asia Pacific funds and the continued development of global, exchange-traded products for retirement.