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It should come as no surprise that large-company value funds generally struggled in 2007. Why? Because these funds tend to invest disproportionately in financial companies -- mostly banks, insurers and brokers -- and that group performed miserably in 2007 because of the subprime-mortgage fiasco. But one large-cap value fund sidestepped the fallout of the housing recession with no damage. Amana Income, with a one-year return of 17%, beat the average fund in its category by 12 percentage points.
In fact, Amana has avoided financial stocks for its entire 22-year existence. That's because it invests according to Islamic principles, which shun debt and interest. So the fund avoids lenders as well as those laden with debt. Manager Nicholas Kaiser is prohibited from owning bonds, so he looks instead to strong dividend growers to generate a steady stream of income.
Sounds restrictive, but you can't argue with the results. Amana Income returned an annualized 10% over the past ten years, beating Standard & Poor's 500-stock index by an average of three percentage points per year. An added bonus of the fund's mandate: To abide by Islam's aversion to gambling, Kaiser maintains a mellow turnover rate, holding each stock in the portfolio for seven years, on average. And, incidentally, you don't have to be a Muslim to invest in this fund.
POSTED BY: Tewe (January 06, 2008 01:36 PM)
I read this article from Kiplinger Magazine.I've been interested in this kind of fund for a long time.But it is hard to find and if I can find one, they have costly front end loads and high expense ratios.Could you recommend some that are less costly
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