NEST Sharia - changes to fund.

BlackKnightMonty

Just received this email. Any thoughts on what this might mean?

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The Nest Sharia Fund is for anyone who wants their pension savings invested in line with Islamic principles. It’s open to all Nest members, regardless of faith. You switched to this fund in xxx xxxx.   Until now, the Nest Sharia Fund has only invested in company shares that are screened to comply with Islamic principles. That means it’s riskier than our other funds, which put your savings into a wider range of investments.   It’s important to strike a balance between growing your pension savings while protecting them from losses. After all, this is the money you’ll be relying on for later life. We’re taking steps to reduce risk levels for members who’ve chosen this fund because of their faith.

What’s happening?   We’ll start investing some of your pension savings in sukuk in November 2024. Most of your savings will continue to be invested in company shares.   Sukuk are considered an Islamic version of bonds. They provide a steady source of income to your pot in a similar way other bonds would. Sukuk bonds do not receive interest which is prohibited under Islamic finance.   How will this affect my pension savings? By spreading your risk across different types of investments, your pension savings will be better protected from potential falls in the stock market. What do I need to do?   Absolutely nothing. We’ll work in the background to reduce the amount of risk that’s taken with your savings. If you’re interested in switching funds, take a look at your fund options.

DE_612183

I don't get how if the bonds don't receive interest how it is an investment?

leosayer

I imagine they're like zero coupon bonds - no interest is payable but the bonds will be purchased at a discount to the fixed value at maturity, thereby rising in value over the duration of the bond.

BlackKnightMonty

DE_612183 said:

I don't get how if the bonds don't receive interest how it is an investment?

I’ve read this and I am none the wiser!!

https://www.investopedia.com/terms/s/sukuk.asp#:~:text=A%20sukuk%20is%20a%20sharia,indirect%20interest%2Dbearing%20debt%20obligations.

DE_612183

Ok, so I think what it is, is this:/

Instead of investing in a loan to build a hotel

you ( or the fund ) is buying a share of the hotel - the earnings ( as a shareholder ) are then paid back to the investor.

SomeGuy1

I phoned Nest about this and they have no record about the email being sent out and told me to forward the email to phishing@nestpensions.org.uk

I don't think it's phishing. I just think Nest are useless.

BlackKnightMonty

SomeGuy1 said:

I phoned Nest about this and they have no record about the email being sent out and told me to forward the email to phishing@nestpensions.org.uk

I don't think it's phishing. I just think Nest are useless.

Some nice joined up comms then!

Amoux

I will need to see the allocation properly before making any decision, but to be honest I'm a bit annoyed by the update. The whole point of investing in the sharia fund was for the higher risk. I was happy with the risk level and de-risking my fund into so called "Sukuk bonds" does me no favours. 

BlackKnightMonty

Amoux said:

I will need to see the allocation properly before making any decision, but to be honest I'm a bit annoyed by the update. The whole point of investing in the sharia fund was for the higher risk. I was happy with the risk level and de-risking my fund into so called "Sukuk bonds" does me no favours. 

I have a similar view on this.

Such a limited choice with NEST.

Frustrating.

Cus

Amoux said:

I will need to see the allocation properly before making any decision, but to be honest I'm a bit annoyed by the update. The whole point of investing in the sharia fund was for the higher risk. I was happy with the risk level and de-risking my fund into so called "Sukuk bonds" does me no favours. 

I always assumed that the mandate for the Sharia fund is not to invest in high risk, but to invest according to religious values.  I guess a byproduct was that it ended up investing in growth tech.
I'm sure there are other non religious designed funds that offer the same high risk?

monkeys_uncle

Last time I looked, the 'Higher Risk' fund was about 71% bonds, so it will be interesting to see how that compares with the new Sharia asset allocation.