Wealthsimple’s Sharia-compliant ETF follows the Dow Jones Islamic Market Developed Markets Index for quality and low volatility, which Reitberger claims to be following closely. The companies selected by the index generally do not derive their income from non-halal industries such as alcohol, tobacco, pork, weapons and defense, and adult entertainment, as well as conventional banking and insurance. To ensure the purity of the ETF, Mackenzie and Wealthsimple have also hired a globally recognized Sharia consultancy, Ratings Intelligence Partners, to certify the ETF as Sharia-compliant when it was launched. In the future, tests will be carried out regularly every six months.
While Reitberger does not question the ETF’s Islamic credibility, he said the WSHR has to prove that, like all new investment products, it is persistent. Typically, he said he wanted a track record before he could safely recommend his clients’ assets and invest in a particular investment. Its recommended product, the Global Iman Fund, has a record of 15 years.
“When a company that doesn’t focus on being an Islamic investment company or complying with Sharia law develops this type of product, it ultimately wants it to make money. If it doesn’t, the company may be inclined to put it on the chopping block, ”he said. “Assuming that the Sharia-compliant ETF is not making any money and is closed, investors who have invested in it may not be able to find a solution later.”
This does not mean that investment products based on Islamic principles are money losers. In sharia-compliant investment circles, Reitberger said that less strict Muslims might advocate the idea that halal investments tend to miss out on profit and performance opportunities because of the ban on so many industries.
However, he said various Islamic indices and products around the world, including the Global Iman Fund in Canada, have remained reasonably competitive with similar funds that do not meet Shariah-compliant standards. This means that, contrary to intuition, value-based investing does not have to forego performance as long as investors have the right instruments.