Higher risk vs Shariah fund pension

fylde2022

Hi,
My company nest pension is, currently, in the higher risk pot and is performing well.
I'm 35, so have a while, before I reach retirement, yet.

I've noticed the Shariah pot seems to be performing, massively.
Is there more of a risk, with the Shariah pot, than the higher risk? 
Should I consider switching from the higher risk to Shariah?

Linton

I would expect Shariah funds to be 100% equity since earning interest is not permitted.  Any 100% equity fund would be considered very high risk for the average investor.  A quick bit of research shows that the Nest higher risk fund is on average 70% equity which many people on this forum would not consider particularly risky.  So the Shariah fund is performing comparatively well (at the moment) not because it is investing in a particularly risky way but rather because it is not permitted to use the low risk components of more balanced funds.

If you are happy you can accept the greater volatility of a 100% equity fund then the Shariah fund is the only way of investing at that level of risk provided by Nest. With say 25-30 years until retirement with ongoing contributions taking advantage of any major falls 100% equity in my view makes sense.

Linton

Update to my previous post.

I have now been able to track down some limited info on the Nest Shariah fund.  It is 25% invested in Apple, Microsoft, Alphabet (Google) and Facebook.  This seems a little wild to me - perhaps you should consider splitting your pension between the Shariah fund and the higher risk one.

garmeg

Out of interest, I looked up Sharia on Hargreaves Lansdown's website and the only one they have is Kotak India Mid Cap which hasnt performed very well. Thought they would have had more than that on offer.

AnotherJoe

Linton said:

Update to my previous post.

I have now been able to track down some limited info on the Nest Shariah fund.  It is 25% invested in Apple, Microsoft, Alphabet (Google) and Facebook.  This seems a little wild to me - perhaps you should consider splitting your pension between the Shariah fund and the higher risk one.

That is most likely a consequence of the recent rises in those shares rather than a deliberate intent to invest so heavily in them. They may perhaps trim those back out of prudence ?
The high risk fund is likely also invested heavily in them, if not to the same extent, for the same reason.

 If OP wanted to spread amongst more  companies then is there a smaller companies fund in Nest ? I know it's a restricted set so maybe that's not an option. 

In any case, from what I've seen, Sharia funds do seem to do well, as a likely byproduct of not investment in interest bearing products. OP, as long as you can hold firm during down times then I'd say increase your risk level because you have so much time. You can always scale back later after you've reaped the growth. 

westv

Does that mean that trying to follow sharia in a pension fund and also wanting low risk is impossible? I'm glad I don't have to worry about any religious rules.

[Deleted User]

It does not get more Sharia than Facebook and Google. These are the companies Mohammed himself used to pick for his investments.