Abstract
This paper analyses the risk-adjusted performance of Islamic and conventional equity funds during the COVID-19 pandemic. We show that Islamic equity funds demonstrated differentials in risk-adjusted performance, investment styles, and volatility timing compared to their conventional counterparts. Specifically, the results revealed that Islamic equity funds are more resilient to COVID-19 shock since they outperformed non-Islamic peers during the peak months of the pandemic. The trend continues even when the spread smoothens. These findings confirm the safe-haven properties of Islamic equity funds, which is helpful for investors aiming to hedge pandemic risks. The style analysis reveals investment drift from riskier styles to more prudent options in response to each stage's uncertainties. The results suggest policymakers should further investigate Islamic financial assets and their underlying principles to improve the resilience of economic systems in any future black swan events.
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