What they do
The fund invests in emerging markets equities, following the principles of Islamic finance. As a practical matter, that means that AMDWX functions as an ESG-screened EM fund. The fund diversifies its investments across the countries of the developing world, industries, and companies, and generally follows a value investment style.
How they’ve done
Over the past decade, the fund has averaged 2.3% annual returns which trails its Lipper peer group by 1.4%.
The fund has earned a three-star rating from Morningstar, as well as the equivalent of a two-star, 10-year rating from MFO.
What we liked
From our May 2011 profile: “Islamic investing principles, sometimes called sharia-compliant investing, have three distinctive features. First, there’s the equivalent of a socially responsible investment screen that eliminates companies profiting from sin. Second, there’s a prohibition on investing in interest-bearing securities, which effectively eliminates both bonds and financial sector equities. Third, sharia precludes investment in deeply debt-ridden companies. Between those three prohibitions, about two-thirds of developing market companies are removed from Amana’s investable universe. This, Mr. Kaiser argues, is a good thing. The combination of sharia-compliant investing and his own discipline, which stresses buying high-quality companies with considerable free cash flow (that is, companies that can finance operations and growth without resort to the credit markets) and then holding them for the long haul, generates a portfolio that’s built like a tank. That substantial conservatism offers great downside protection but still benefits from the growth of market leaders on the upside.”
AMDWX has two great strengths. First, it’s the least volatile EM option. It had the second-smallest maximum drawdown over the past decade, it has the lowest standard deviation, the lowest downside deviation, the lowest bear market deviation, and the lowest downside capture ratio of any EM fund. Second, it’s the “greenest” EM option among long-standing funds. It has the highest ESG scores on the Lipper/MFO Premium metrics and the equivalent of a five-star ESG rating from Morningstar.
Performance has substantially strengthened in recent years. It leads its peers by 2.4% annually over the past three years with the second-lowest maximum drawdown.
In an unusual vote of confidence, the Amana board of directors has invested $33 million of their own money into Amana’s four funds.
Founding managers Nick Kaiser and Monem Salam stepped aside in 2016 and 2012, respectively. Mr. Kaiser is now enjoying, we hope, a well-deserved retirement after a long career full of thoughtfulness and honors. Mr. Salam returned to the fund in 2017 and now serves on a three-person team.
The administrative stuff
Amana Developing World has $62 million in assets and an expense ratio of 1.34%. The minimum initial investment is $250.
Other funds we’re reviewed in the category
|Age/yrs||Returns since launch, vs peer group||Yield|
|American Beacon Continuous Capital Emerging Markets||CCEYX||2.3||-0.9||0.46|
|Grandeur Peak Emerging Markets Opportunities, a modest part of Snowball’s Roth IRA||GPEIX||7.3||+3.1||0.15|
|Seafarer Overseas Growth and Income, the second-largest holding in my non-retirement portfolio||SIGIX||9.1||+3.0||1.20|
|Driehaus Emerging Markets Small Cap Growth||DRESX||9.6||+2.4||0.64|
|Fiera Capital Emerging Markets||RIMIX||9.3||+4.2||0.00|
|Touchstone Sands Capital Emerging Markets Growth||TSEGX||6.8||+6.0||0.00|