This week we contributed to a superb publication based in Malaysia and recommend a subscription to their great news updates and platform. A brief extract from IFN is below…
This week, IFN spoke to Lawrie Chandler, the director and investment unit head of UK-based Edale Group, to discuss the concept behind the new BondSmart Sukuk platform, an online fintech venture designed to provide mass affluent investors with a steady fixed income stream through Shariah compliant channels.
“We have been investing into Sukuk for 10 years and I’ve always noticed how it seems to be an asset class of the elite and the mega wealthy,” said Chandler. “If I am a priority banking client or an average everyday investor, unless I’ve got US$200,000 to spare it is very difficult for me to participate in Sukuk. This is a way to bring about an opportunity for investors to access that.
“The attraction is of course the underlying asset – big companies, paying a big profit rate, and getting security of capital, which generally other asset classes don’t offer.”
The firm has used the principles of crowdfunding to build a co-investing concept where investors can effectively buy a slice of beneficial ownership in a Sukuk facility and receive the equivalent return. Unlike mutual funds or equity investment, where the value can go up and down and the volatility can be off-putting for those seeking a steady return, Sukuk offer a fixed income stream that Chandler suggests could become increasingly valuable – especially as global demographics develop.
“Essentially, we have simply added a crowdfunding front-end onto a traditional institutional investment process allowing people to pick and choose the type of bonds they want access to,” he explained. “A lot of people will be retiring over the next decade and will be faced with the challenge of moving from wealth accumulation to expenditure. We see a big demographic demand from older investors who will need access to income. And there are a lot of client groups who want access to this asset class and can’t get there. So far, the only way for the everyday investor to access Sukuk has been through mutual funds, but the problem there is that you don’t necessarily know what your yield will be.”
So what is the difference with the new retail platform?
“We effectively give people a key to get into a penthouse apartment, where the Sukuk are laid out on the table,” said Chandler. “They can buy a seat at the table rather than paying for the whole meal.”
The firm is currently speaking with a range of financial institutions in the Middle East and Malaysia to discuss white-labeling the platform and rolling it out directly to Shariah-conscious customers.
“We want to give people the opportunity to buy cash flows from big businesses and known brands, and get a better return than they would from cash in the bank but through a less scary route than the stock market – essentially, a halfway house,” explained Chandler. “We are hoping to have a couple of those channels live within the next few months.”
This is an excerpt from an interview with Lawrie Chandler, the director of Edale Group, discussing the new BondSmart retail Sukuk investment platform. To learn more or to listen to the full conversation, log on to www.islamicfinancenews.com/podcasts.