Check Portfolio to Minimize Risk

The portfolio analysis refers to the term of examining the functioning of the portfolio by measuring it under certain circumstances. The process involves the efforts carried out so to accomplish the tradeoff in between the presence of the risk and returns. The portfolio analysis is carried out by a professional with software and the person doing analysis is known as the Portfolio Analyst. The portfolio analysis it is important to consider it so to know about the proper functioning of the capital invested and profits occurs in output. The whole process of analysis is done with the aim of measuring the fiscal and operational affect of the portfolio on the trade.

Every trade business includes certain risk with it. Therefore it is important to find out risk involved in the business so to get hold on the profit earned. As every business includes some risk factors so it is necessary to do portfolio analysis. The Portfolio Analyst here plays a vital role in knowing about the impact of the portfolio on the investment made and the outcome appears. The portfolios analysis is conducted into two parts: Risk aversion and Analyzing returns.

1) Risk aversion: This type analysis consists examine the portfolio while considering the business risk. In this the investors play safe by investing in the assets which is of low cost and have low risk. They get satisfy with the low profit as their outcome because their investment is also low. In such analysis one do not want to take risk by investing in risky asset to gain more profit.

2) Analyzing returns: The Portfolio Analyst here analysis the portfolio on the basis of two types of returns: average returns and composite returns. In average returns the average is taken out of the particular asset, whereas in compound return the mean is taken out to find the accumulative effect on the total output.

To examine the portfolio the analyst requires the software tool which could be purchase from the market. There are several types of software for analysis is present which helps the investors to find out the risk factors. It helps the investors in finding out the investment to be done on the asset.

Description: The portfolio analyst plays a vital role in finding out the best portfolio so to minimum the risk of any lose and could gain more profit by investing on right asset.

Ijara as a tool of Islamic finance

The term Ijara means putting on rent and the Sharia process is known as Ijara-wa-Iqtina which means rent to own a property. Islamic banking is characterized by a banking activity that is in accordance to the Shariah law which is the main Islamic law. The Islamic law prevents the acceptance of interest rates or fees for loans of money or any other kind of monetary transaction. If you are knee deep in debt, you can invest your money in Ijara loans and utilize the money in paying debt help services. Taking some step towards your debt helps you feel secured in terms of your finances. Read on to know more about investing in Ijara loans.

Objective of investing in Ijara loans

The objective of investing in the Ijara loan funds is to receive attractive monthly returns on your investments. Participating in the WRIIF that invests carefully in selective Ijara funds will help you gain maximum returns on your investments. This kind of transaction satisfies the requirements of the Islamic finance law which is also approved and allowed by the Shariah board. The Ijara fund typically allocates its assets in buying equipments or portfolios of equipment which will again be leased to different lessees. The portfolio of the equipments will have a diversified range of leases and types of equipment. The entire portfolio needs to be invested according to the principles prevailing in the Islamic finance law or the Shariah.

Ijara as an Islamic investment

Ijara is a very famous kind of mark up structure in the Islamic finance. It is a form of leasing where the bank buys a capital property and leases it to end-users under installment plans. The installments consist of rental-for-use and partly payments. The customer or the investor will select the asset that has to be financed and the bank buys it from the supplier and leases it to the customer for a definite period. You can also refinance the assets that are owned by the client in a sale. The bank has to be paid rent as he is the owner of the assets. The bank must exercise all the rights and obligations of the
lessor such as maintenance, renovations and insurance.

Thus, the Islamic bankers have decided to avoid any kind of business risk by facilitating the investment in the Murabaha and Ijara. The most essential feature of such investment is the presence of an authentic identifiable trade transaction. With such growing popularity of investment banking, you can well earn huge profits by trying your luck in Ijara investment. Utilize the proceeds in paying off your debts. Taking a step towards your debt helps you feel confident about your finances.

Sukuk and Islamic Investment

Islamic finance govern by Shari’ah law , as per Shari’ah law interest is strictly restricted in Islam.Free debt help is allowable without taking any interest, or these can be treat as to help anyone, without taking any interest from the lender. As interest is against the Islamic law bond market not develop in the Islamic world. Most of the Petroleum exporting countries are investing there surplus amount in the US free debt help bonds and they not taken interest on investment. Sukuk is invested to protect the religious value and also to increase the Muslim investment market.Malaysia is the largest issuer of the sukuk bonds ,sukuk is not only famous in islamic market but also some European and American countries issued sukuk bonds to get the islamic investment of rich middle east countries.Sukuk is also consider as a portfolio investment to diversify the investment.

A major challenges facing Islamic financial products like sukuk bonds are the lack of liquidity.According to S&P, there are more sukuk listed in Dubai than any other else, but the secondary market is virtually non-existent. Further, the bulk of sukuk are over-the-counter instruments,with listed sukuk accounting of only 20-255 of outstanding sukuk is issued worldwide; that is, $10-15 bn so far, says the rating agency. Zeti contends that creation of persistent supply of Islamic papers and instruments that would upgrade the secondary trading of instruments and greater depth of the market is the hour. According to her, another factor that could help futher expand the market for Islamic finance products would be to bring in greater diversity in the market for Islamic financial institutions and portfolio manager to manage their funds effectively. Pricing issues also pose significants challenges to the unhindered growth of the market. There is the need for developing a relevant benchmark for efficient and credible pricing. For example , if sukuk is issued based on the Ijarah principle, and if it uses the property as its underlying assets then actual rate of rental may be explored to be used to determine the rate of return on the instrument. However, it may then fluctuate depending upon the demands and supply for that property. Shari’ah experts, who have a full understanding of the mechanics of sukuk, should play an important role in ensuring its proper pricing as well as governance, she suggests.

Taking Islamic finance products global is another challenges as it requires harmonization of standards and practices between those of regional Islamic finance and international standards. Zeti suggests that full support has to be accorded to the international standard setting organizations such as Islamic Financial Service Board (IFSB) and to the Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI) to formulate appropriate standards that would strengthen the Islamic Financial system.The Malaysia based IFSB has already formulated the prudential treatment for sukuk investment by the Islamic Financial Institution s as specified in the Capital adequacy standards and has also undertaken a set of initiatives to strengthen the framework and practices in the Islamic money market.

Also, lack of rating is another major issue. Given the complex legal structure, it adds to the cost and complexity of rating. Further rated instruments are almost non-existent in the Middle East.
However, global rating agencies such as S&P, however, feel that there is a way out. “the provisions of Islamic debt instruments may add level of complexity to rating analysis long stading methodologies and rating scales are sufficiently broad so far to incorporate the varied features of Islamic debt financing,”It said in recent report. Islamic finance largely centers on assets-backed approaches and sometimes involves a degree of risk-sharing more commonly born by equity investors.In practice,however,as illustrate d in the sukuk that Standard & Poor’s has rated, binding guarantees and other contractual obligations can place transactions firmly in the debt category.

Government promotes UK to become the hub of Islamic finance

Islamic finance is poised for a massive growth as London is soon to become the hub outside the Middle East. Gradually London is emerging as a key centre for practicing Islamic finance. Besides the Middle East, there is only one place that is backing Islamic finance the most and that is UK. Most financial institutions are aiming at becoming a part of the global market that is growing with time. As per current reports it is surveyed that Islamic banks deals with funds that amount to $200 billion and it is expected to go through a rise up to 15% per annum and reach an alarming level of $1 trillion by the end of 2010. Investors find a good way of investment in the sukuk bonds and they can utilize the proceeds in getting consolidation help if they are mired in debt.

The principles behind Islamic finance have to be in accordance with the Shariah, which is the legal law in Islam. According to the Islamic law, charging of interest rates are completely forbidden and this implies that they have not paid much attention to the recent economic turmoil. Instead of this such institutions have raised funds and provided liquidity while the other banks were struggling to perform well.

Islamic finance has long been stated as outside the mainstream finance and there are certainly some particular factors that have contributed to the sudden growth and popularity of the Islamic banks and their finance. The primary reason behind this growth is that there is an increasing number of Muslims who are interested in taking out mortgages for buying their homes and they are also investing money in bonds and other financial products. The most probable second reason is the high oil prices in the Middle East have created an increase in the demand of the local financial markets. This has resulted in the investors in the Middle East seeking a better alternative.

A large number of banks in UK are stressing on Islamic banking and opening Islamic windows in the conventional banks. But there lies a question as to why London has become the hub of Islamic finance. London has been the major financial centre for decades and it is always considered as more open to new ideas and innovations. The United Kingdom was the first member of the European Union (EU) to authorize the Islamic finance. Since the English law is highly respected throughout the world, it is most a preferred jurisdiction for most Islamic transactions. The most important reason behind UK becoming the hub of Islamic finance is that the government is boosting this growth and it has introduced a certain number of changes in the government policies to support Islamic finance.

The UK’s first Islamic bank, known as the Islamic Bank of Britain was opened in the year 2004 and now it has five banks operating in accordance with the Shariah and that has been registered by the Financial Services Authority which is UK’s banking regulator. Thus, with all these statistics, UK has been rightly deemed to be the hub of Islamic finance. Any debtor can easily invest in the Islamic market with care and gain huge returns. Someone who is in need of debt consolidation help, can utilize the proceeds of the investment.

Has Islamic banking outshone the principles of Islam?

With the growing popularity of the Islamic banking system, Islamic finance has been on the rise since the last few years. As the Islamic finance is escalating through the stairs of success, there is a question in everyone’ s minds, ‘ Has Islamic banking outshone the principles of Islam?’ Most people are using the Islamic financial instruments to treat their debts and doing something about their overwhelming amount of debt helps them boost their confidence over their finances. But what is the reason behind this sudden growth in the Shariah based economic system?

Assets in the Islamic banks in the most crucial Muslim market like United Arab Emirates and Saudi Arabia rose 32% from the year 2007 to 2009. The same percentage has risen 13% in the case of traditional banks in the same market conditions according to a report
produced by the IMF or the International Monetary Fund in the month of September, 2010. In the United States of America, more than twelve companies offer financial products in compliance with Shariah.

It is seen that there is no worldwide rule that governs the Islamic finance. Almost all financial practitioners accept that the charging of interest rate (riba) on any kind of loans is forbidden according to the Shariah law. The risk and reward in the lending procedure,
is not only expectant but also necessary. They believe that since Mohammed was a merchant, transactions should be in accordance with the real economy where there are no derivatives. The money that is lent to consumers should not be used for evil activities.

The venture capitalists have offered a good representation for Islamic finance as most of their transactions involved shared reward and risk. Similarly, Islamic banks use some of the trade forms of the venture capitalists. While financing a car, a traditional bank will
offer you high interest rates but Islamic banks use an agreement known as a Murabaha. In such a case, the bank will buy a car from the customer and sells it to him at a score with the payments collected in the form of installments. As these payments are spread over a period of time, this mark up looks much likes a couple of interest rates.

Islamic banking system rose in the middle of 1970s and since then it has been seen rising, fueled by the oil prices that left the Gulf States in abundance of cash. With the widespread of pan Islamism, the Muslims went to look for their own alternatives too conventional finance. Thus Islamic banks are gaining recognition for their benefits of the practices. The prohibition of leverage, restrains their growth, yet their balance sheet remains relatively strong. Debt helps a person understand the importance of investment.
Invest your money in the Islamic finance and eliminate your debt burden gradually.

Strategies of portfolio investors in Middle East

While investment is the market of the clever and the intelligent, it demands spread of risks and assets. Most people invest their money to gain huge yields after their stocks and shares have appreciated with time. Portfolio investment is a type of investment that
attempts to achieve a mixture of securities in order to earn maximum return by going through the minimum risk. Have a look at the investment strategies of the investors of the Middle East.

The Chief Investment Officers are faced with the responsibility of allocating different amount of funds to different areas where they think they can yield the highest returns within the next few years. A significant problem in the global basis is the sovereign debt
and this nullifies the benefits of investing in the bond market. The interest rates are most likely to remain stable in the Western world as the yield curves usually remain steep. On the other hand, the interest rates in the emerging markets are already increasing and will
also continue increasing.

From the perspective of security, it makes much sense to invest in money in the bonds of the market of US and Germany as money is safer in those countries, though returns might be low. Hedge funds play an important role in shaping any portfolio, however
having a good portfolio manager is more important when it comes to facing risks. Equities often look tempting, but in the long run they won’ t prove to be beneficial for an investor. Equity investments, both in the emerging and in the mature markets are where
investments can grow over the next few years.

Concentrated portfolios do matter because the more concentrated your portfolio is, the better are your chances of earning huge returns. As stocks can become expensive at times, therefore portfolio investors limit portfolios to 20 stocks that will be able to grow
with the right price. This approach is perhaps less risky than investing in a whole lot of financial instruments. Since you’ re investing our portfolio in 20 stocks, you get the chance to know the 20 companies well. This approach has always been effective with the
investors catering to portfolio investment in the Middle East.

The demand over Islamic bonds, Sukuk expected to recover in a year

The demand for the Islamic sukuk bonds from the Middle East is expected to return to a pre-crisis level by the end of the third quarter as the companies that are dedicated to Shariah based bonds are restructuring their debt and higher yield over stock market investment is luring the investors more in the year 2010. If you’ re an investor who has incurred a huge amount of debt, you can calculate your debts with a debt pay off calculator and invest your money in the Islamic bond market. The yield of investment can be used to pay off high interest credit car debt.

The yields that are offered in the investment in the Islamic bonds are so high that investors globally, are taking huge risks of investing here and spreading the risks of returns. According to an eminent spokesperson, they are expecting to see a pre-crisis level of international as well as regional interest in investing in the Islamic debt market by the third quarter of the year 2011.

The average yield on sukuk that were sold by the issuers of one of the ace stock holding institutions rose to 20 basis points or 0.2% points last week to 5.8%. The global sales of sukuk have declined to a percentage of 24 this year to $12 billion after reaching an
alarming level of $31 billion in the year 2008. This statistics was taken just before the financial crunch in the markets that drove all the investors away from all but the safer government securities, according to a data.

The bond sales in compliance with the Shariah is also increasing in the Persian Gulf after a state holding company signed a deal with 99% of the creditors to change the terms and conditions on $24.9 billion on debt. The economic growth in the North Africa and the
Middle East will escalate to a 5% in 2011 from a 3.8% in the year 2010 and a 1.1% in the year 2009, as surveyed by the International Monetary Fund.

Companies in the Gulf countries that deal with sukuk bonds have already sold $1.25 billion of sukuk bonds since the economic crunch in Dubai. This year’ s total was an amount of $3.7 billion. Institutions like Islamic Development Bank sold $500 million of five year term sukuk on the 20th of October that has yielded 40 basis points. Another Shariah complaint lender sold $750 million of similar sukuk bonds on the 30th of September and has also received orders of $6 billion.

According to a Bahrain based Islamic unit, a trend is seen that supports the fact the liquidity in the Islamic bank market should return. This would contribute to the increase in the popularity of the Islamic bond market.

A hedge fund is a fund that can take long and short positions, undervalued securities, trade options and bonds. They can invest in any market conditions wherever they foresee maximum gain on returns and minimum risk. The main aim of hedge funds are to lessen the volatility and risk while attempting to gain maximum returns on investment involving the minimum amount of risk under all market conditions. Investing in hedge funds may provide you with easy cash which may help you with debt relief.

A hedge fund is a fund that can take long and short positions, undervalued securities, trade options and bonds. They can invest in any market conditions wherever they foresee maximum gain on returns and minimum risk. The main aim of hedge funds are to lessen the volatility and risk while attempting to gain maximum returns on investment involving the minimum amount of risk under all market conditions. Investing in hedge funds may provide you with easy cash which may help you with debt relief.

Hedge funds can produce a huge amount of gains in all market conditions. What kind of funds, do you think can yield in such a way in all market conditions? It is undoubtedly the distressed debt. A very common question is why an investor will invest in distressed debt that can prove to be a financial risk. The answer is very simple. The more risk you take in such distressed debt, the more you can gain on returns. Distressed debt can be sold at a very low par value. If the company whose distressed debt have been invested turns out to be a trustworthy company after filing bankruptcy, then the price of that companys debt will tend to rise. These large returns attract investors of hedge funds.

Perspective of hedge funds

The hedge funds can get access to distressed debt through three options. The bond market, mutual funds and the distressed firm itself are the three options. Have a close look at each of these.

Bond market: Distressed debt can be easily obtained from the bond market because of the rules related to the holdings of mutual funds. The mutual funds are not allowed to hold bonds that have defaulted. Therefore a large amount of distressed debt can be acquired after a firm defaults.

Mutual funds: Hedge fund investors can also buy directly from mutual funds. Hedge funds can acquire large quantities and mutual funds can sell large quantities. So, both ways they need not worry about market risks involved in large transactions.

Distressed firm: This involves working with the distressed company which demands the company to extend its credit on behalf of the hedge fund. This credit can be in the form of bonds or revolving credit line.

Thus if you are in need of easy cash to help yourself with debt relief, become a hedge fund investor. This will give you access to quick cash and you can pay off your debts and lead a better life.