Insights · June 2026
Waqf endowments hold an estimated $300 billion to over $1 trillion of long-duration capital, and much of it earns about 3% a year. The gap with leading institutional endowments comes from governance and structure, and both can be fixed.
A Waqf is built to last forever. Istidāmah, perpetual sustainability, is its core mandate, and that requires real, inflation-beating growth. Most Waqf portfolios don't deliver it.
Leading endowments target 8–10% a year and double their capital every seven to nine years. At a typical Waqf return of 3%, doubling takes about 23 years. Over 30 years, $1 grows to $2.43 at 3%, and to between $10 and $17 at 8–10%. That shortfall is a cost borne by future beneficiaries, and it can't be recovered later.
Growth of $1 over 30 years
The strongest predictor of institutional investment results is governance independence. U.S. university endowments and the best-run sovereign wealth funds put investment decisions in the hands of professionals, insulated from political cycles and short-term administrative pressure.
Waqf institutions can adopt the same model: independent boards of financial experts, working to a long-horizon Investment Policy Statement (IPS). Without that, portfolios drift toward excessive caution and slow decision-making, which works against the perpetual mandate.
Waqf portfolios tend to be concentrated in low-yield domestic real estate and cash. Leading endowments spread capital across private equity, venture capital, absolute return and global real assets, and capture the illiquidity premium that drives most of their excess return.
Cash and fixed income
Real estate (Waqf: domestic, direct · Endowment: global real assets)
Private equity and venture capital
Absolute return and hedge funds
When faith-based capital enters private markets through a Sharia sleeve inside a conventional fund, the sleeve has to exclude deals that use conventional leverage or prohibited contracts. Two things follow. The sleeve misses some of the fund's strongest deals (leveraged buyouts, for example), so its returns drift from the main fund. And the smaller eligible pool leaves it more concentrated, with higher idiosyncratic risk.
The answer is to build compliant structures from the start, using partnership (Musharakah) and profit-sharing (Mudarabah) models for private equity and venture, instead of filtering a portfolio designed for someone else.
Feeder sleeve in a conventional fund
A filtered subset of a portfolio built for other investors. Fewer deals, more concentration, returns that drift from the main fund.
Dedicated separately managed account
The Waqf owns the whole portfolio, built to its Sharia and impact criteria from the start.
We see three steps, in this order.
Professionally governed Waqf capital strengthens social safety nets and reduces fiscal pressure on governments. It also builds credibility for faith-based finance more broadly. The underperformance is a problem of execution, and the fix is well understood: independent governance, a disciplined IPS, and SMAs that give access to global, Sharia-compliant private markets.
Sources: IRTI/IsDB Global Waqf Core Principles; IsDB, Revitalizing Waqf for Economic Development; NACUBO-TIAA Study of Endowments; Yale Investments Office annual reports; AAOIFI Sharia Standards; IMF Santiago Principles; OECD institutional investment research; peer-reviewed studies on Waqf portfolios, endowment illiquidity premia and Sharia screening in private equity. Doubling times and growth figures are compound-interest calculations.