Halal ETFS UK
By Staff Writer, Halal Incorp
Understanding ETFs
Exchange-Traded Funds (ETFs) are investment vehicles that combine features of mutual funds and individual stocks.
They offer investors exposure to a diversified portfolio of assets, such as stocks or bonds, and are traded on stock exchanges throughout the trading day at market-determined prices.
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This intraday trading capability provides liquidity and flexibility, distinguishing ETFs from traditional mutual funds, which are priced only at the end of the trading day.
ETFs can be structured to track various indices, sectors, commodities, or investment strategies.
They are generally known for their cost-effectiveness, transparency, and tax efficiency. Investors can choose from a wide array of ETFs to align with their investment goals, risk tolerance, and ethical considerations.
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Halal Investing and Shariah Compliance
For Muslim investors, aligning investments with Islamic principles is essential. Shariah-compliant investing, often referred to as halal investing, prohibits involvement in certain industries and practices, including:
- Alcohol production and sales
- Gambling
- Pork-related products
- Conventional financial services involving interest (riba)
- Weapons and defence manufacturing
- Entertainment industries deemed unethical
Additionally, companies must meet specific financial ratios to ensure minimal involvement with interest-bearing debt and interest-based income.
Halal ETFS UK
Shariah-compliant ETFs are designed to adhere to these principles, enabling Muslim investors to participate in the financial markets without compromising their religious beliefs.
Halal ETFs Available in the UK
As of January 2025, UK investors seeking Shariah-compliant ETFs have several options:
- Wahed FTSE USA Shariah ETP
This ETF aims to replicate the performance of the FTSE Shariah USA Index, which includes large and mid-cap U.S. companies that comply with Shariah principles.
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The fund employs a full replication strategy, investing directly in the constituents of the index. It is available in multiple currencies, including GBP, USD, and EUR, and has an ongoing charge of 0.50% per annum.
- HSBC MSCI World Islamic ESG UCITS ETF USD (Acc) (Ticker: HIWO)
Launched on 30 November 2022, this ETF tracks the MSCI World Islamic ESG Universal Screened Index, comprising large and mid-cap securities from developed markets worldwide that comply with Shariah investment principles and meet specific ESG criteria.
The fund uses full replication to mirror the index and has a total expense ratio of 0.30% per annum. As of January 2025, the fund’s size is approximately £33 million.
Considerations for Investing in Halal ETFs
When selecting a halal ETF, investors should consider several factors:
- Expense Ratio: Lower expense ratios can enhance net returns over time.
- Fund Size and Liquidity: Larger funds typically offer better liquidity and tighter bid-ask spreads, reducing trading costs.
- Index Composition: Understanding the underlying index and its constituents ensures alignment with investment objectives and risk tolerance.
- Currency Exposure: Investors should be aware of the currency in which the ETF is denominated and any associated exchange rate risks.
- Compliance Assurance: Confirming the ETF’s adherence to Shariah principles is crucial. Reputable ETFs often have certifications from recognized Shariah boards or scholars.
The Growing Market for Halal ETFs
The demand for Shariah-compliant investment products has been increasing, driven by a growing Muslim population seeking ethical investment options.
Halal ETFS UK
In response, financial institutions have expanded their offerings to include halal ETFs, providing greater accessibility and diversification opportunities for investors.
In the UK, the rise of digital investment platforms and robo-advisors has further facilitated access to halal ETFs, enabling investors to incorporate these products into their portfolios with ease.
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The integration of ESG (Environmental, Social, and Governance) criteria with Shariah compliance, as seen in the HSBC MSCI World Islamic ESG UCITS ETF, reflects a broader trend towards ethical investing, appealing to a wider audience beyond the Muslim community.
Halal ETFS UK
Halal ETFs offer Muslim investors in the UK a viable means to participate in the equity markets while adhering to Islamic principles.
By providing diversification, cost-effectiveness, and compliance with Shariah law, these ETFs serve as valuable tools for ethical investing.
As the market for Shariah-compliant products continues to grow, investors can anticipate a broader selection of halal ETFs, catering to diverse investment strategies and preferences.
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Disclaimer: (Always Do Your Own Financial Due Diligence When Investing)