Jahangir Aka; SEI Investments (Middle East)

As discussed in our previous Shariah Investing reports, Shariah Indices have performed better than their conventional counterparts throughout the credit crisis. Over the last eleven credit-crisis challenged quarters, the MSCI World Islamic Index has delivered a good track-record with lower volatility than the MSCI World Index. However, it is not just this out performance in volatile times that speaks positively for Shariah Investing but its performance across a full market cycle.

Moving into the third quarter of 2009, the assumption was the alpha that Shariah Indices have built up over the credit crisis would begin to give way as markets and financials in particular moved into recovery. August and September saw equity markets across the world rally and perform strongly. Across these months we saw Shariah Indices underperform their conventional counterparts. However, single months of the conventional indices rallying have not dampened the strong absolute performance of the Shariah Indices. Considering the MSCI World Islamic Index versus the MSCI World Index back to January 2004 (see Figure 1), we see that as of the end of September 2009, the Islamic Index still strongly outperformed but also that it has performed consistently well through a bull and bear market.

Figure 1: Source; MSCI, in USD from January 1, 2004 to September 30, 2009.

performance prior to July 2007 is simulated performance, provided by MSCI.& These results may or may not have been obtained if the index had actually been running during that time period.

Conventional Edges ahead in a Low Quality Rally but Volatility pulls it Back&

The evidence is mounting to suggest that the global economy has turned the corner from recession to recovery. As companies report better-than-expected results and credit conditions continue to improve, investors are returning to the market and positioning themselves for a global economic recovery.

After the extreme risk aversion of last year, we are now seeing a sharp recovery in stocks as the reduction in economic and financial stress leads to normalisation in investors' risk appetites. Equity investors have begun shifting to riskier asset classes and generally favoring cheaper and lower quality stocks.

A low quality rally does not favor Shariah compliant securities which tend to be of higher quality as they are restricted by Shariah guidelines on level of debt. As a result, we saw the MSCI Islamic Indices underperformed on average their traditional MSCI counterparts in August 2009. August saw the MSCI World Islamic Index return 0.72% and the MSCI World Index return 1.93% for the month in US Dollar terms.

In September the MSCI World Islamic Index edged ahead of the conventional as a higher level of volatility returned to the markets with investors retracting slightly away from financial stocks amid fears that they had rallied too far too fast. Additionally the poad expectations of recovery have bolstered the Shariah preferred sectors such as manufacturing and health care. September saw the MSCI World Islamic Index return 6.03% and the MSCI World Index return 5.82% for the month in US Dollar terms

Over the Longer Term Shariah is Still Ahead

The MSCI World Islamic Index is still posting strong absolute performance. Whilst the conventional index has edged forward and year-to-date has returned 19.95% compared to the Shariah return of 16.82% in US Dollar terms as of end September 2009, this switch in leadership has only come about in the last two quarters. Over a longer time period, 1 January 2004 to 30 September 2009, the MSCI World Islamic has significantly outperformed the MSCI World by over 15%. This goes to show that the Shariah investment approach is not just one for the credit crisis, as some critics have tried to dismiss, but also has merit through a strong bull market, especially a period in which the financials sector performed strongly, albeit fell strongly in the end.

Looking Forward to the Next Market Cycle

It is generally agreed that we are not out of the woods yet and still face economic challenges ahead. As one example, the extreme levels of government and central bank stimulus will eventually need to be removed, and this could limit the growth potential of the global economy and corporate profits once they enter into a sustainable recovery. Equity markets may continue to struggle with setbacks as they attempt to climb a wall of worry and are constrained by still-declining earnings and tight conditions in the credit markets. Setbacks are inevitable and will correspond with perceptions regarding the outlook for economic activity and corporate profitability. As such, in SEI's opinion, a key benefit of Shariah Investing remains that Shariah indices should be less volatile and less likely to succumb to erratic market swings

The favouring of low-debt companies and high-quality stocks remains a positive investment strategy for Shariah and non-Shariah investors alike. Although the less risk-averse investor may believe that companies with sound underlying fundamentals and valuations will not offer as great a potential return, the consistent/conservative Shariah approach should still offer benefits in volatile times.&

-Ends-&

About SEI

SEI (NASDAQ:SEIC) is a leading global provider of outsourced asset management, investment processing and investment operations solutions. The company's innovative solutions help corporations, financial institutions, financial advisors, and affluent families create and manage wealth. As of June 30, 2009, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $360 billion in mutual fund and pooled assets and manages $136 billion in assets. SEI serves clients, conducts or is registered to conduct business and/or operations, from numerous offices worldwide.&& For more information, visit www.seic.com.

SEI currently manages four Shariah Compliant funds under the SEI Islamic Investment Funds range. This range includes SEI Islamic US Equity Fund, SEI Islamic pacific Basin Equity, SEI Islamic European Equity and SEI Islamic Emerging Market Equity Fund.

For more information, visit www.seic.com.

This material has been produced by SEI Investments (Europe) Limited 4th Floor, Time & Life Building 1 puton Street, London W1J 6TL which is authorised and regulated by the Financial Services Authority. This material is distributed by SEI Investments (Middle East), which is a panch of SEI Investments (Europe) Limited and is regulated by the Dubai Financial Services Authority.

This material is intended only for professional Clients; therefore no other person should act upon its contents.

No offer of any security is made hereby. Recipients of this information who intend to apply for shares in any SEI Fund are reminded that any such application may be made solely on the basis of the information contained in the prospectus.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts.

The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested. If the investment is withdrawn in the early years, it may not return the full amount invested.

In addition to the normal risks associated with equity investing, international investments may involve risk of capital loss from unfavourable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. products of companies in which technology funds invest may be subject to severe competition and rapid obsolescence.

Whilst considerable care has been taken to ensure the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information and no liability is accepted for any errors or omissions in such information or any action taken on the basis of this information.

past performance is not a guarantee of future performance.

Investment in the range of SEI's Funds is intended as a long-term investment.&

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© press Release 2009