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Halal-focused investment firm Wahed Invest has debuted its first ETF – the Wahed FTSE USA Shariah ETF (HLAL US). Listed on Nasdaq, the fund provides exposure to US firms that comply with Shariah principles. The ETF is linked to the FTSE USA Shariah Index which screens the constituents of the parent FTSE USA Index to determine their Shariah status. The most notable sector difference between the FTSE USA Shariah Index and the FTSE USA Index is that the former has zero allocation to financials stocks (vs. 18.5% in the FTSE USA). Consequently, the index has a larger allocation to technology (28.6% vs. 22.0%), healthcare (22.2% vs. 12.7%), and oil & gas (13.1% vs. 5.0%). While there are a few Shariah-compliant ETFs listed in Europe, with issuers DWS and BlackRock offering products, the space is relatively untouched in the US.

Affin Hwang Asset Management has launched the TradePlus Shariah Gold Tracker (GOLDETF MK) on Bursa Malaysia, the first commodity-tracking ETF listed in Malaysia. The fund provides investors with exposure to gold through a shariah-compliant investment structure. The fund tracks the LBMA Gold Price AM Index by investing in physical gold bars purchased from London Bullion Market Association-accredited refineries. Datuk Seri Tajuddin Atan, CEO of Bursa Malaysia, said this ETF would allow investors to buy and sell gold in the same manner as trading shares on Bursa Malaysia. The government of Malaysia has also announced that ETFs traded on Bursa Malaysia will be exempted from stamp duty starting from 1 January 2018. GOLDETF’s annual fees (including management, trustee and custody fees) is 0.76%.

Nasdaq Dubai and IdealRatings have launched a suite of indices tracking the performance of global Islamic bonds. The indices may serve as the underlying to future investment products including exchange-traded funds. To be eligible for inclusion in the indices, each bond must have a minimum size of at least $100m, a remaining time to maturity of at least three months, and must be approved by a Shariah accredited board. The Nasdaq Dubai IdealRatings Sukuk Index family comprises the Global Sukuk Index as well as several indices covering distinct segments of the market. They include investment grade issuances, issuances by sovereigns, issuances by corporates, issuances by financial institutions and Gulf Cooperation Council (GCC) issuances. As of 1 October 2016 the Global Sukuk Index has returned 3.1% year-to-date and 15.2% since the index’s base date of 1 November 2012.

MSCI has announced the expansion of the existing MSCI Islamic Index Family with the launch of the M-Series that addresses client demand for financial screening criteria based on market capitalisation. The M-Series of indices uses three financial ratios in this process: total debt-to-market cap, cash and interest-bearing securities-to-market cap, and accounts receivables and cash-to-market cap. Using market capitalisation is argued, by some, to provide a more accurate representation of these ratios. In addition to screening companies based on financial ratios, the indices avoid companies involved in activities contrary to the principles of Shariah investment.

Shariah-compliant exchange-traded funds (ETFs), which provide low-cost exposure to conventional equity markets while strictly adhering to Shariah investment principles, are benchmarked to indices that apply a series of trade activity and financial screens to weed out non-compliant companies. The screening process is typically overseen by leading Islamic scholars and results in a portfolio of securities in adherence with Shariah law. The major difference compared to conventional indices is the application of financial/leverage screens. By excluding companies with high levels of debt, the resultant portfolio has lower financial risk and superior credit fundamentals.