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Nick Kaiser, Saturna Capital

Nick Kaiser's Amana funds, which invest according to Islamic law, are trouncing their large-cap competition.

David Kathman, 01/30/2009

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The trip up Interstate 5 from Seattle to Bellingham, Wash., features some of the most glorious scenery in the Pacific Northwest. Nick Kaiser grew up in Bellingham, and he founded Saturna Capital here in 1989 after selling his previous investment firm in Indianapolis. As we enjoy a seafood lunch at an outdoor café overlooking Bellingham Bay and Kaiser regales his guests with stories about the history of the bay and the nearby islands, it's not hard to see why he came back. "You can put a crab trap in the water, and an hour later, you have dinner," he says. Kaiser is an avid boater and a student of maritime history, and a few years ago, he built his dream house in Bellingham, with a study full of books and a winding path down to a boat dock.

Bellingham may seem to be an unlikely setting for one of the world's leading centers of Islamic finance, but that's what Saturna has become under Kaiser's leadership. In an unassuming building downtown, Kaiser manages the $750 million Amana Trust Growth AMAGX and the $500 million Amana Trust Income AMANX, by far the largest mutual funds that invest according to Islamic law. Although Muslims living in the United States are the funds' target audience, lots of non-Muslims attracted by the funds' stellar track records have jumped on board over the past few years. Both funds have trounced the S&P 500 Index over the past decade and rank among the best performers of any large-cap stock funds during that period.

A Tight-Knit Group
Kaiser's journey to the top of the Islamic finance world began in Indianapolis, where he and a partner were running Unified Management, a publicly traded investment firm. Their clients included service organizations such as the Islamic Society of North America, headquartered in a suburb of Indianapolis. Eventually, a group of local Muslim businessmen asked Unified to start an investment fund for them. Although Kaiser is not himself Muslim and knew little about Islamic investing at the time, he readily agreed and soon became well versed in this highly specialized field. "I said I could manage an Islamic mutual fund for them if they would teach me about Islamic investing," he says. "It worked out well for both sides."

His clients were so pleased with Kaiser that they stayed with him when he went west to start Saturna. Now, Saturna has $1.5 billion in assets under management, up more than tenfold since the beginning of 2005. Most of that is invested according to Sharia (Islamic law), though Kaiser also manages the secular Sextant Growth SSGFX and Sextant International SSIFX funds, which are small but growing. A tight-knit group of fewer than 50 employees has helped the firm expand into such areas as retirement planning and education savings accounts. Most recently, the firm launched the Saturna Trust Co., which helps American Muslims manage their estates in accordance with Sharia.PAGEBREAK

Kaiser's right-hand man in Bellingham is Monem Salam, who joined Saturna in 2003 as its director of Islamic investing. Salam is in charge of making sure that the Amana funds are Sharia-compliant. At first glance, the two men could not seem more different. The 62-year-old Kaiser speaks rapidly in his soft but gruff-sounding voice, with an unmistakable dry wit. Salam is a devout Muslim, more than 25 years younger than Kaiser, with a somewhat more intense, deliberate manner, but also an adventurous streak. He grew up in Texas as the son of a pilot, and his pursuit of a private pilot's license as a Muslim was recorded in a documentary recently shown on PBS.

Despite their different demeanors, Kaiser and Salam are very much at ease together, and both of them become more animated when talking about Islamic investing principles and doing right by their clients. "A mutual fund is actually the ideal vehicle for investing according to Sharia," Salam says, "because everybody is treated equally."

That equality extends to things like brokerage commissions. Saturna doesn't use any soft dollars, and a few years ago, the firm started doing all portfolio trades for free through its in-house broker-dealer, Saturna Brokerage Services. The Amana funds have "good, tough board members who keep us on our toes," Kaiser says. "They ask the right questions, and the tougher they are, the better I like it."

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