After Prime Minister Narendra Modi’s call to embrace swadeshi, can satvik investment be far behind?
The latest entrant into the asset management business, the Wealth Company Mutual Fund, has launched its ethical investment fund, tracking the Nifty 500 Shariah TRI Index, with a notable difference.
With the new fund offer closing on Wednesday, investors will soon get to invest in The Wealth Company Ethical fund which will not only invest in companies that are certified as Shariah compliant but also follow the theme of Ahimsa which excludes industries such as meat and poultry (which is a part of most other ethical funds), gambling, alcohol, tobacco, narcotics, leather, pesticides and any enterprise involving animal cruelty.
Tata MF was the first to launch an ethical fund in 1996, followed by Taurus MF in 2009 and Quantum MF in 2024. The ethical fund AUM stands at ₹4,000 crore with Tata MF accounting for the lion’s share.
Fund excludes meat, alcohol, and animal-based industries
While the Wealth Company Ethical Fund is also benchmarked against the NIFTY 500 Shariah TRI Index, the scheme is a pure-play ethical fund and has made a conscious decision to avoid investing in companies that deal in meat and poultry products, even if such companies are part of the benchmark.
Another unique and differentiating factor for the Wealth Company Ethical Fund will be its investment of 20 per cent of AUM in the financial services sector, which boasts of many blue-chip companies that have historically performed well.
Ethical funds’ performance beats traditional indices
Interestingly, the NIFTY 500 Shariah has outperformed traditionalindices in the last 20 years delivering a CAGR of 16 per cent compared to 14 per cent for the Nifty 500 and 13 per cent for the Nifty 50.
‘Wealth must grow with values,’ says founder Madhu Lunawat
Madhu Lunawat, Founder, MD & CEO, The Wealth Company AMC, said the decision to start the MF venture with an Ethical Fund stems from the belief that wealth creation and values must go hand in hand.
In an industry often driven by short-term performance and market trends, she said that capital must flow to enterprises that not only deliver returns but also make a meaningful contribution to society’s progress through sustainable, transparent, and ethical practices.
Experts see promise in sustainable, well-governed portfolios
Trivesh D, COO of Tradejini, said the portfolio of ethical funds tends to include companies with strong governance, lower leverage, and sustainable business practices, which typically perform better in both good and bad times, as well as in volatile ones.
The filter used by these funds excludes sectors that undergo regulatory or reputational shocks, but the problem is maintaining the set screening standards throughout market cycles and delivering alpha, he added.
Well-managed ethical funds can offer stable, risk-adjusted returns for those willing to align values with disciplined investing, said Trivesh.