Participation fund
Key points
- The portfolio excludes interest-bearing bonds, deposits and companies with predominantly interest income (banks, insurers); compliance is overseen by an advisory committee.
- They provide diversification for investors preferring interest-free finance; the return profile resembles conventional funds in the same asset class.
- interest-free does not mean risk-free; equity-heavy participation funds fall with the market.
Formula / calculation
sub-types under the participation umbrella include equity, lease certificate (sukuk), money-market-like participation and mixed funds. Return comes from participation account profit shares, sukuk lease income and stock price moves.
Interpretation
BIST participation indices (XK100, XK030) serve as benchmarks.
They provide diversification for investors preferring interest-free finance; the return profile resembles conventional funds in the same asset class. Participation equity funds should be compared with the BIST Participation 100 index.
Pitfalls
interest-free does not mean risk-free; equity-heavy participation funds fall with the market. The eligible asset universe is narrower, so diversification is limited. Profit share rates move in parallel with interest rates.
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Frequently asked questions
What is Participation fund?
A participation fund invests in lease certificates (sukuk), participation accounts and advisory-board-approved stocks in line with interest-free finance principles.
How is Participation fund calculated?
sub-types under the participation umbrella include equity, lease certificate (sukuk), money-market-like participation and mixed funds. Return comes from participation account profit shares, sukuk lease income and stock price moves.
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