Ben Handley, Investment Manager (Quilter Cheviot Shariah-Compliant Portfolio Service)

Navigating faith-based investment choices for Muslim Protected Parties and their families

For many Protected Parties (P), and their families, who are Muslim, investing settlement funds is not just a financial decision, it’s a deeply personal one shaped by faith and values. Deputies often share in this journey, working closely with families to help ensure choices reflect both financial security and religious priorities. After thoughtful consideration and, in many cases, consultation with trusted religious advisers, families often initially take one of two paths. Some opt for a Shariah-compliant portfolio, valued for its strict adherence to Islamic principles and structured oversight. Others choose an ethical approach that reflects Islamic values but offers greater flexibility.

These decisions can feel complex, as each option carries different implications for compliance, transparency, and investment strategy. Understanding the distinctions between these approaches, and the variations of how different providers typically implement them, can help everyone involved feel more confident in their choices.

Shariah-compliant portfolios: the basics

Shariah-compliant portfolios follow strict Islamic principles, such as:

• No riba (interest)
• No gharar (excessive uncertainty)
• Exclusion of haram sectors such as alcohol, gambling, and conventional finance

Shariah compliance is overseen by qualified scholars and reviewed both at inception and throughout the life of the portfolio. Each individual investment must pass rigorous screening and remain compliant over time.

Shariah-compliant portfolios often carry higher volatility because they exclude entire sectors, have greater exposure to foreign currencies, and rely more heavily on equities to achieve growth.

How do ethical portfolios compare?

Ethical portfolios may aim to reflect Islamic values without meeting every technical criterion of Shariah law. From a risk perspective, Islamic ethical portfolios allow a broader investment universe, including fixed income, providing more balance between growth and stability.

How do different providers approach Shariah-compliant investing?

A growing range of solutions exist for families seeking Shariah-compliant investments, with two main models: a pooled fund model and a bespoke discretionary model.

Shariah compliance requires ongoing oversight as markets and investments evolve, with the two models often approaching oversight differently.

In pooled fund solutions, oversight typically occurs at the fund level through the provider’s Shariah board, with the depth and transparency of review varying between providers. By contrast, discretionary portfolios, by their bespoke nature, provide full transparency and the ability for scholars to review each investment.

When strict Shariah compliance is especially important, and when families wish to share portfolio details with their own religious advisers for additional reassurance, a discretionary route may be preferred due to the additional clarity it affords.

Questions to help inform choices:

From our experience, these questions may help highlight what is ‘under the bonnet’ of different provider options and help to further inform a family’s choices:

• If the family opts for an ethical route, how are the Islamic values defined and reflected in portfolio construction?
• If the family opts for a Shariah-compliant approach:
• Who certifies Shariah compliance, and how often is it reviewed?
• Can you see the individual investments, or only pooled funds?
• Who makes day-to-day decisions, and how accessible are they for queries?
• How do fees break down between the investment manager and third-party funds?
• Can the portfolio adapt if the family’s interpretation or priorities evolve?

Quilter Cheviot’s approach

At Quilter Cheviot, we offer a range of options suitable for Muslim protected parties and their families, including:

• Shariah-compliant portfolios, developed in partnership with Yasaar Ltd, an independent third-party research body who provide quarterly reviews. These are conducted by their board of scholars who offer detailed rationale for each investment. This is provided via a discretionary model for families who value transparency and direct engagement, which we feel is vital to ensuring proper compliance.
• Ethical and bespoke discretionary portfolios, designed to reflect Islamic values without rigid restrictions, offering flexibility while maintaining integrity.

Want to learn more?

For deputies and Muslim families who want to learn more about the options available and our approach at Quilter Cheviot, we are holding a webinar in early February. Please register your interest by emailing alexander.chapman@quiltercheviot.com and we will share further information in due course. The webinar will also be promoted via the PDF events calendar early next year, with further registration details shared.

Capital at risk. The value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future return. You may not recover what you invest.