Shariah compliant investment vehicles take socially responsible investing (SRI) to a new level, proving that conscious investing does not necessarily depress returns. Hedge funds can turn to specialty shops that specialize in weeding out investments that violate Islamic Law. Non-accredited investors (investors with less than $1 million to invest) can also gain admission by following Shariah indexes or mutual funds.

Investing Under Islamic Law
Islamic law does not permit investors to derive benefits from interest paid on loans, the sale of pork, firearms, and other sin investments related to pornography, gambling, alcohol or tobacco. Institutions that engage in short selling and the use of leverage are also frowned upon since borrowing goes against one of the basic principles of Islamic law. Following these rules cancels out the possibility of investing in investment banking firms like Goldman Sachs (NYSE:GS), insurers like AIG (NYSE:AIG) and other financial service firms that use derivatives as a way to boost their profits. (To learn more, read What is an Islamic investment policy?)

Islamic Law Hedge Fund Advisor
Shariah Capital, one of the world's best Islamic financial institutions according to Global Finance Magazine, is one resource hedge fund managers turn to when developing strategies to meet the Shariah compliance needs of their clients. Islamic law scholars and attorneys work with clients to find suitable investments and devise products that attempt to mirror strategies involving short selling and the use of leverage.

Shariah Indexes for Individual Investors
Standard & Poor's (S&P) has compiled more than 20 Shariah indexes focusing on specific countries, such as Japan or emerging markets and broad categories like global infrastructure and global property. Individual investors can begin by focusing on two broad Shariah-compliant equity indexes introduced by S&P earlier this year. The S&P CNX Nifty Shariah Index and the larger S&P CNX 500 Shariah Index are both in partnership with India's National Stock Exchange. Indian outsourcer Infosys (NASDAQ:INFY) is the most familiar stock among the top three holdings on each index. The other top holdings of each include, oil conglomerates, reliance industries and India's largest engineering company Larsen & Toubro (OTC:LTOUF).

Shariah Compliant Funds
The Amana Trust Income Fund (AMANX) also helps investors take the guess work out of choosing Shariah compliant investments. The fund is almost completely void of financial service companies enabling it to outperform the Standard & Poor's 500 Index (S&P 500) by roughly 6% a year to date. The AMANX fund has a three and five year return of 11.72% and 15.78% respectively. The funds top three holdings, include United States Steel (NYSE:X), energy company FPL Group (NYSE:FPL) and natural gas company EnCana Corporation (NYSE:ECA). The Iman K Fund (IMANX) is a much smaller Shariah compliant fund with a similar focus.

Socially responsible investing is growing in the U.S. Investors should know the rules other cultures incorporate into their socially conscious investment decisions. In addition to the social benefit derived from choosing investments based on Islamic laws the strategy has also proved to yield positive returns for its investors.

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