Shariah Investing: The Advice Opportunity Advisers Can’t Ignore
Shariah Investing: The Advice Opportunity Advisers Can’t Ignore
In The Godfather, Michael Corleone famously says, “It’s not personal, it’s strictly business.” For advisers, it’s rarely one or the other: recommendations have to stack up financially while also reflecting what matters to the client. For many, Shariah investing makes that requirement explicit — the portfolio must deliver outcomes, while staying aligned with faith-based principles.
So what is Islamic (Shariah) investing? It’s a way of saving and investing that follows Shariah principles: avoiding interest (riba), excessive uncertainty (gharar), and exposure to harmful sectors such as alcohol, tobacco and gambling. It’s also built on the idea that money shouldn’t generate money in isolation; returns should be linked to real economic activity and, where possible, shared risk. Importantly, it isn’t “for Muslims only” — many non-Muslims consider it because of its ethical screens and emphasis on responsible finance.
This is no longer niche in the UK: Islamic finance is valued at around £8.06bn1, with retail customers rising by around 20 per cent a year and an estimated 44 per cent of British Muslims, especially Gen Z and millennials, actively exploring Shariah-compliant investments2. Interest is widening beyond faith-based demand too, with up to 30 per cent of non-Muslims open to switching for ethical reasons2. The UK is also a hub for green and sustainable sukuk bond3 listings and leads Europe with 50+ Islamic fintech firms4.
The advice problem: demand is rising, but “default” solutions have been narrow
Many Shariah options — particularly in pensions — have historically leaned heavily on equities, not because clients want more risk, but because Shariah-compliant portfolios have fewer like-for-like defensive building blocks to make use of than conventional ones. In practice, clients can feel pushed into uncomfortable choices, such as accepting higher volatility than they want, blending Shariah and conventional holdings, or even delaying investing altogether.
Even when a “balanced portfolio” is most appropriate for a client, it’s not as simple as replicating a 60/40 equities/bond split. Conventional portfolios often rely on government bonds for stability and diversification. Shariah portfolios can’t use conventional bonds, and Sukuk (often described as Islamic bonds) can behave differently in risk and liquidity terms. Add the governance question — ongoing compliance, monitoring, and dividend purification — and it becomes less clear where advisers can turn for solutions that are both genuinely compliant and within the most suitable risk framework.
Why it matters: suitability includes values — and outcomes
From an advice perspective, Shariah investing matters for two reasons: suitability and outcomes.
Suitability, because for many clients, Shariah alignment is a core part of the brief, not just a preference or a style tilt. The advice aim is still the same: build a solution that respects their values while meeting their risk profile, time horizon and retirement objectives. However, in reality, some investors have had to compromise due to limited options and a lack of access to a suitable portfolio —
Outcomes, because Shariah investors need the same building blocks as any other client: diversified multi-asset solutions that can dial risk up or down between equity-like growth and more defensive exposures. That’s particularly relevant in pensions and retirement planning, where capacity for loss and time horizon change over time. A client approaching retirement typically needs a smoother ride than an all-equity approach can offer — Shariah-compliant investors are no different.
How HSBC helps: the best of both worlds — multi-asset discipline and Shariah governance
HSBC Asset Management brings the best of both worlds: a global multi-asset platform built to manage risk through market cycles, and deep Shariah expertise grounded in robust governance. With a 30+ year track record in multi-asset investing and 20+ years managing Shariah funds, HSBC has a proven track record of addressing a central client challenge for Islamic investors: building a genuinely defensive allocation that matches the client’s risk needs while staying fully within the required framework.
That matters because Sukuk are often described as “Islamic bonds”, but they’re not a plug-in replacement for developed market government bonds. They can carry a different risk profile and liquidity dynamics, so a simple “swap bonds for sukuk” version of a conventional 60/40 can leave clients taking more risk than intended. HSBC’s approach is to broaden the toolkit — combining Shariah equities with sukuk, Shariah-compliant listed real estate and gold to improve diversification and manage volatility. Within fixed income, we expand exposure to higher quality supranational bonds alongside short duration Islamic cash-type instruments to add flexibility in managing duration and risk.
These capabilities come together in the HSBC Shariah Multi Asset Fund, designed to diversify across equities, listed real estate, sukuk, gold and cash, targeting a balanced risk profile. Governance is built through an independent Shariah Committee, who provide oversight and issues an annual Shariah certificate. HSBC also manages the dividend purification process on investors’ behalf under the committee’s supervision.
For IFAs, the takeaway is simple: when Shariah investing is the right fit, choosing a provider with the track record and governance to make the recommendation straightforward lets you stay focused on client outcomes and the wider advice journey.
To discuss how HSBC Asset Management can help you meet the rising client demand for Shariah-compliant solutions, email wholesale.clientservices@hsbc.com and download our HSBC Islamic Investment Solutions brochure for more on Islamic investing and the HSBC Shariah Multi Asset Fund.
Source: HSBC Asset Management, as at May 2026.
1 https://practiceguides.chambers.com/practice-guides/islamic-finance-2025/uk/trends-and-developments
Key risks
The value of an investment in the portfolios and any income from them can go down as well as up and as with any investment you may not receive back the amount originally invested.
- Callable Bond Risk Any unexpected behaviour in interest rates could negatively impact the performance of callable debt securities (securities whose issuers have the right to pay off the security’s principal before the maturity date)
- Counterparty Risk The possibility that the counterparty to a transaction may be unwilling or unable to meet its obligations
- Credit Risk A bond or money market security could lose value if the issuer’s financial health deteriorates
- Default Risk The issuers of certain bonds could become unwilling or unable to make payments on their bonds
- Derivatives Risk Derivatives can behave unexpectedly. The pricing and volatility of many derivatives may diverge from strictly reflecting the pricing or volatility of their underlying reference(s), instrument or asset
- Emerging Markets Risk Emerging markets are less established, and often more volatile, than developed markets and involve higher risks, particularly market, liquidity and currency risks
- Exchange Rate Risk Changes in currency exchange rates could reduce or increase investment gains or investment losses, in some cases significantly
- Index Tracking Risk To the extent that the Fund seeks to replicate index performance by holding individual securities, there is no guarantee that its composition or performance will exactly match that of the target index at any given time (“tracking error”)
- Interest Rate Risk When interest rates rise, bond values generally fall. This risk is generally greater the longer the maturity of a bond investment and the higher its credit quality
- Investment Leverage Risk Investment Leverage occurs when the economic exposure is greater than the amount invested, such as when derivatives are used. A Fund that employs leverage may experience greater gains and/or losses due to the amplification effect from a movement in the price of the reference source
- Liquidity Risk is the risk that a Fund may encounter difficulties meeting its obligations in respect of financial liabilities that are settled by delivering cash or other financial assets, thereby compromising existing or remaining investors
- Operational Risk Operational risks may subject the Fund to errors affecting transactions, valuation, accounting, and financial reporting, among other things
Further information on the potential risks can be found in the Key Investor Information Document (KIID) and/or the Propectus of Offering Memorandum.
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HSBC Global Funds ICAV – Shariah Multi Asset Fund is actively managed.
Shariah investment restrictions may result in the funds performing less well than funds with similar objectives which are not subject to these restrictions.
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Content ID: D071833 ; Expiry Date: 31.12.2026