LONDON — Manchester United Plc, the world’s most famous football club, has been included in the stock universe of the UK’s latest Islamic equity product launched last Thursday by leading independent stockbroker Redmayne Bentley.

Fans of the ‘Reds’, who are also interested in ethical Shariah-compliant investment, can now buy shares in Man United through Redmayne Bentley’s Islamic Investment Service (IIS), which the company stresses "is the first of its kind in the UK" and enables private clients to buy and sell shares in major global stock markets in a Shariah-compliant framework by providing comprehensive company analysis, stock picking, and advisory services.

Man United is the sole company in the leisure sector, and is one of 47 stocks in the IIS universe, which includes famous names such as Boots, British Gas, BP, Shell, AstraZeneca, GlaxoSmithKline, Vodafone, Cable & Wireless, and Exel. Under Redmayne Bentley’s ethical stock selection criteria, Man United is one of those companies that currently satisfy key acceptable Islamic investment principles.

This means that Man United Plc’s debt/equity ratio is not more than 33 percent; that it does not have interest derived earnings of more than 5 percent; and that its assets comprising cash and receivables does not exceed 49 percent. Man United, according to Redmayne Bentley’s criteria, is also not a company that derives its income from alcohol, conventional financial services, insurance, gambling, tobacco, arms manufacturing and sales, and other such activities.

Man United’s inclusion in Redmayne Bentley’s IIS stock universe could pave the way for other major British and European football giants listed on the stock market such as Arsenal, Newcastle, and Tottenham Hotspur to be included in the universe provided that they satisfy the Shariah-compliance criteria and financial ratios.

To ensure that the universe remains Shariah-compliant, Redmayne Bentley monitors and filters the stocks on an ongoing basis. As soon as they stop meeting the above compliance, they are then removed from the universe as soon as possible. To help investors and potential clients, the company has opened a dedicated section to IIS on its website, including the updated stock universe.

However, Redmayne Bentley has not stressed whether it has an in-house Shariah compliance capability through an appointed Shariah Advisory Board or whether it has outsourced this compliance.

The Leeds-based stockbroker is initially targeting those areas in Yorkshire and the North with high Muslim populations, primarily from Pakistan, Bangladesh and India. Not surprisingly, its three usual stockbroking routes — execution-only, advisory, and discretionary — are serviced by a team speaking five languages — English, Punjabi,Urdu, Hindi, and Gujarati.

A number of stockbroking firms based in Yorkshire and Lancashire have received several inquiries over the last few years from Muslim investors wishing to invest in Shariah-compliant equity portfolios. As such, Redmayne Bentley’s IIS is essentially demand driven.

But it is also aiming the service at Muslim investors worldwide, especially in the Gulf Cooperation Council (GCC) states and in Southeast Asia.

According to Dr. Hardeep Tamana, investment manager at Redmayne Bentley, this service "will open up a new world of investment to many of the UK’s population of two million Muslims, as well others overseas. Many Muslims have felt so daunted by the difficulties of complying with their religious tenets in investing in the stock markets that they have put their money in property, or left it in bank accounts.

"Finding halal (acceptable) stocks has always been the first hurdle. The greater difficulty Muslims face is tracking their appropriateness over time, and above all, finding compliant stocks that have the potential to make money in differing market conditions." Redmayne Bentley are also confident that IIS will also attract non-Muslims seeking ethically-sound investments. As an incentive, the company has waived the management fee until Jan. 31, 2004, and claims that its commission structure is very competitive — 1.65 percent on the first 7,000 pounds worth of shares bought or sold; 0.5 percent on the balance up to 20,000 pounds; and 0.45 percent on higher amounts.

Islamic equities aimed at the retail sector, however, has had a chequered history in the UK. At least two Islamic international equity funds, Al Madinah and Al-Safa failed dismally to take off in the UK in the 1990s, partly because of the wrong promoters, lack of seed capital, inexperienced Shariah-compliance, and the lack of marketing.

A third Islamic equity fund, Parsoli Global Equity, launched earlier this year and managed by Old Mutual, has yet to make its mark.

Redmayne Bentley’s IIS does not go down the fund route, but is essentially a stockbroking service which has identified a niche product for a niche but potentially high net worth segment of the UK investment market.

A recent report by UK independent market analyst, Datamonitor, predicted that the number of high networth Muslim investors in the UK is set to rise significantly. Research also showed that these investors are an easy group to target, living in well-defined regions in the South, Midlands, and the Pennine (Yorkshire/Lancashire) region of the UK in cohesive communities. The report further concluded that there is a huge well of UK Muslim money waiting in cash to be pumped into Islamic equities and other investment products once they become available.

All this must be music to the ears of companies such as Redmayne Bentley, which is not only the UK’s largest independent stockbroker, but has won several awards in the last two years. In 2001 it was judged to be the best portfolio panager in the Investors Chronicle/Reuters ‘UK Investment Awards’; and this year it was voted the Best Discretionary Stockbroker in the Shares ‘UK Equity Awards 2002’.

However, the success of IIS will depend on Redmayne Bentley’s marketing strategy, especially its understanding of and imagination in reaching and convincing Muslim and other ethical investors to part with their money; and on the quality of its on-going Shariah compliance. But ultimately it will also depend on the performance of its chosen portfolios.

Otherwise there will be other asset classes such as real estate and property waiting to tap this growing pool of funds and market segment. With UK Financial Secretary Ruth Kelly in a letter to the Islamic Finance Advisory Group, chaired by Andrew Buxton, senior adviser to Barclays Bank, confirming that the UK Treasury will be including the provision to remove the double stamp duty for Islamic Ijara (leasing) based house mortgages in the Finance Act 2003, unless other unexpected emergencies take up parliamentary time, Islamic housing and real estate finance is expected to take off significantly toward the end of 2003.

— 28 October 2002