Islamic Fund Management
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the underlying assets of the fund determines its NAV, which is calculated at the close of
every trading day. Investors can buy and sell units from the fund at a price determined
by the NAV of the fund. Prices can thus rise and fall based on fluctuations in the NAV.
 A close-ended fund issues a fixed number of shares via an initial public offering (IPO).
Once the IPO is over, it is closed to new investments (ISRA, 2015, p. 540). The fund is
listed on the stock exchange and its shares are traded on the exchange. Similar to stocks,
its share price is determined by market supply and demand; it is often trading at a
discount or premium to its NAV (Foster, 2014).
 An ETF invests in securities that track an index such as the S&P 500 or the Dow Jones
(ISRA, 2015, p. 543). Its portfolio reflects the constituents of the index and hence
replicates the performance of the index. Ownership of the ETF is divided into shares;
unlike open-ended funds, its shares are traded like stocks on a stock exchange. Its share
price is determined by market supply and demand, similar to a close-ended fund.
However, this more closely tracks its NAV compared to close-ended funds as, unlike the
latter, ETF shares are continuously issued or redeemed by a financial institution (Foster,
2014).
Investment funds can also be categorised based on their investment portfolios, which in turn
reflect the asset class they invest in provides a list of different types of funds based
on their investment portfolios and assets.
Table 2.2: Type of Funds by Investment Portfolio and Asset Class
Type of Fund by
Investment Portfolio
Description Assets Invested In
Equity Fund Principally invests in the stocks of listed
companies. Can be actively or passively
managed (tracks an index). Can be further sub-
categorised into:
 Growth fund, which invests in a
diversified portfolio of stocks that aims for
capital appreciation and pays little or no
dividend. Growth stocks are from
companies that are expected to grow more
rapidly than the overall stock market. They
can be from small- or large-cap companies.
 Equity income fund, which invests in
stocks that provide income to unit holders
in the form of dividends.
Company stocks.
Commodity Fund Invests in commodities such as precious
metals (e.g. gold), energy resources (e.g. oil
and gas), agricultural goods (e.g. wheat),
livestock (e.g. animals). Besides direct holdings
of commodities, they can also invest in stocks
of companies involved in the commodity
markets (e.g. gold-mining companies) and
commodity options and futures. Generally, the
more a commodity is in demand, the higher the
price and profit for the investor.
Commodities,
commodities options
and futures.
Shariah-compliant
commodities for
Islamic commodity
funds.