With global markets currently being defined by uncertainty, as geopolitical risks rattle investor confidence and concerns around global market concentration mount, investors continue to seek ways to best to protect capital, while still capturing growth.
Recent market movements have reflected heightened volatility, characterised by sell-offs during periods of aggressive rhetoric from US President Donald Trump and partial recoveries when his tone becomes more measured. As such, investor sentiment has turned increasingly cautious, with rising uncertainty being intensified by the ongoing trade tensions between the US and China. Going forward, investors will need to focus their attention on key developments driving potential sector rotations within the equity market and the risk of broader global contagion effects.
Against this backdrop, an investment approach once considered too niche for mainstream investing is providing an increasingly compelling investment solution amid the current uncertainty. Islamic, or Shari’ah-compliant, investing represents a disciplined, risk-conscious investment framework – one that has shown a consistent ability to navigate turbulent conditions more effectively than many conventional strategies through its focus on quality, balance sheet strength and prudent risk management.
A framework built for volatility
Periods of uncertainty often expose structural weaknesses in markets. Companies dependent on leverage or speculative growth tend to suffer the most when liquidity tightens or economic growth slows. Shari’ah investing, by its nature, avoids these risks.
Today’s global market environment is plagued by persistent uncertainty around geopolitics, inflation, uneven growth, monetary policy and US fiscal sustainability. When considering any asset class, it’s essential to weigh both risk and return within the context of this environment. Equities offer superior long-term growth potential but are higher on the risk spectrum compared with cash, bonds or real estate. Including them in a diversified portfolio is vital. A Shari’ah-compliant fund provides not only equity exposure but also a unique risk-return profile because of the Shari’ah screening, which inherently leads to a higher-quality investment universe.
Under Shari’ah principles, companies must maintain conservative financial structures – with debt-to-equity ratios below 33% – and are excluded from the Shari’ah investment universe if they derive significant revenue from prohibited activities such as alcohol, gambling, weapons or conventional finance. What remains is a universe of high-quality businesses with sound balance sheets, sustainable earnings and prudent management practices.
This disciplined filtering process creates a natural bias towards resilience. In today’s market, where many companies face rising debt costs and margin compression, that resilience has become a decisive advantage.
Outperformance through discipline
Quality wins when uncertainty rises. The investment approach and performance of the Old Mutual Global Islamic Equity Fund is a perfect illustration of this principle. The fund’s focus on companies with strong profitability and low leverage allows us to preserve capital when volatility spikes and participate meaningfully in recoveries.
This quality bias isn’t just theoretical. The fund has consistently delivered superior risk-adjusted returns – outperforming both its Shari’ah-compliant and conventional global equity peers over one, three and five years, and earning a five-star Morningstar rating.
Its success lies in how it combines Shari’ah discipline with a systematic, data-driven investment process. Instead of relying solely on traditional bottom-up analysis, the team leverages quantitative models, statistical signals, and advanced risk systems to identify the most attractive opportunities across global markets.
This approach allows the managers to maintain both breadth and precision – assessing thousands of stocks objectively and scaling their process efficiently. It also ensures that every portfolio decision aligns with the ethical and financial rigour demanded by Shari’ah compliance.
What we have found to be particularly effective during the current volatility of global markets is the merging of modern investment science with timeless Shari’ah principles. The result is a portfolio that’s not just compliant – it’s competitive.
Positioning for opportunity amid uncertainty
The Old Mutual Global Islamic Equity Fund’s models also integrate forward-looking earnings expectations, ensuring the portfolio is responsive to evolving macro conditions. We don’t try to predict inflation directly; instead, we rely on consensus earnings forecasts that reflect how inflation and growth trends are affecting companies in real time.
This approach has helped the fund maintain a smoother performance profile even as global markets have swung between optimism and fear. When it comes to the fund’s
current exposure, it is underweight US equities, where valuations remain elevated, and overweight Canada, South Korea and Hong Kong, where fundamentals and pricing appear more attractive.
Sector allocations reflect a balance between defensiveness and growth:
· Healthcare holdings offer durable growth and pricing power amid global health trends.
· Materials remains well supported by high commodity prices together with supply constraints.
· Financial technology exposures like Visa and Mastercard provide participation in global payment innovation, without the leverage risk that excludes conventional banks under Shari’ah rules.
This diversified positioning reflects the fund’s ability to adapt – maintaining discipline while seizing structural opportunities in global markets.
Ethical integrity, financial resilience
Though rooted in Islamic values, the appeal of Shari’ah investing remains universal. Its emphasis on transparency, accountability and balance resonates with the global shift towards responsible and sustainable investing. For many investors, the Shari’ah framework offers a pragmatic model for aligning performance with principle.
The Global Islamic Equity Fund continues to demonstrate that Shari’ah-compliant investing can deliver strong and consistent performance without compromising on ethics.
The fund’s consistent top quartile positioning versus its peers is not simply about performance metrics; it validates a philosophy that places discipline and client outcomes at the core of investment success.
Shari’ah investing isn’t really exclusion; it’s about inclusion – of stronger balance sheets, higher-quality businesses and sustainable long-term thinking. In uncertain markets, that’s what drives outperformance.
A steady hand in a shifting world
As markets grapple with a new era of complexity – where policy risk, inflation persistence and geopolitical shocks remain constant features – Shari’ah investing, grounded in ethical clarity and financial prudence, offers simplicity and strength to navigate this environment. By combining rigorous balance sheet discipline with a forward-looking, data-driven approach, we are carving out a path through volatility that is both principled and profitable.
Maahir Jakoet is the Old Mutual Global Islamic Equity Fund manager at Old Mutual Investment Group.
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