Our Market Views
The year got off to a fast start. The Dow hit its all-time closing high in March, finally erasing all of its losses since October 2007, and the broader S&P 500 ended the quarter with a record close of its own. The Nasdaq struggled with setbacks in the tech sector, while the small-capitalization stocks of the Russell 2000 continued to outpace the other three domestic indices. Despite a strong start for the quarter, the Global Dow suffered yet again from political uncertainties, record unemployment, and a contracting economy in Europe, as well as concerns about a possible slowdown in China.
Azzad Ethical Fund (ADJEX)
The Fund returned 9.57% for the quarter, underperforming the benchmark Russell Midcap Growth Index, which returned 11.52%. The Russell Mid Cap Growth Index measures the performance of the mid cap growth segment of the U.S. equity universe. It includes those Russell Mid Cap Index companies with higher price to book ratios and higher forecasted growth values.
The majority of Fund underperformance took place in February as worries over infrastructure spending in the telecommunications and technology sectors sent these segments of the market lower. Challenges in some sectors were partially offset by success in others. Health care was our best performing sector on a relative basis led by our bio-pharma names.
We continue to favor names with proven, steady growth franchises. And although the recent upward move in equities has seen some pro-cyclical sectors underperform traditional defensive safe-havens like consumer staples, we believe that investors are likely to shift from these safety plays towards more growth-oriented names with reasonable cash-flow multiples. The portfolio has been positioned with this possibility in mind.
Azzad Wise Capital Fund (WISEX)
The Fund returned 1.25% for the quarter, outperforming the benchmark BofA Merrill Lynch US Corporate and Government Master Index, which returned 0.21%. The benchmark index tracks the performance of US dollar-denominated investment grade government and corporate public debt issued in the US domestic bond market, excluding collateralized products.
The Fund's exposure to high-dividend paying stocks was the main driver of outperformance. That category returned more than 10% in the first quarter. US Treasury yields nudged up during the period, which put downward pressure on sukuk (Islamic bond) prices. Seeing this as a buying opportunity, we increased Fund exposure to the sukuk market by adding names from Malaysia, Indonesia, Saudi Arabia and the UAE. The Fund's exposure to bank deposits from the four Turkish Participation (Islamic) Banks continued to generate stable returns. Profit rates have declined, however, due to the credit rating agency Fitch’s decision to upgrade Turkey to investment grade. We continue to seek opportunities for yield in this changing environment.
Thank you for your continued trust and investment in the Azzad Funds.
The performance quoted represents past performance, which does not guarantee future resultsThis summary represents the views of the portfolio manager as of March 31, 2013. Those views may change, and the Funds disclaim any obligation to advise investors of such changes. The Azzad Funds are self-distributed and available by prospectus only. A free copy of the prospectus, which contains information about the Funds’ risks, fees, and objectives, and other important information, is available at www.azzadfunds.com or by calling 888.350.3369.