SP Funds' Sharia-Compliant ETFs Hit The Market

SP Funds recently introduced Sharia-compliant equity and fixed income ETFs. Notably, this boutique asset management firm specializes in socially responsible and halal investing. The SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS) was launched on Dec 18, 2019, whereas the SP Funds Dow Jones Global Sukuk ETF (SPSK) made its debut on Dec 30.

SPUS and SPSK in a Nutshell

SPUS seeks to track the performance of the S&P 500 Sharia Industry Exclusions Index. It is designed to provide value-conscious exposure to those S&P 500 companies that meet the guidelines of the Accounting and Auditing Organization for Islamic Financial Institutions. Using the exclusion methodology to arrive at the final portfolio, the following are not considered, alcohol, gambling, defense/weapons, tobacco, adult entertainment, pork products, credit cards, music, cinema and broadcasting as well as Interest-based and highly-leveraged businesses. The fund has an expense ratio of 0.49%.

SPSK tracks the Dow Jones Sukuk Total Return (ex-Reinvestment) Index. The index is made up of 85 holdings, all of which are investment grade and denominated in U.S. dollars, representing investments in seven foreign countries, and had an average weighted maturity of 5.92 years. For inclusion, sukuks must have an outstanding issue size of at least U.S. $200 million, a minimum time to maturity of a year, and a credit quality rating of at least BBB-/Baa# by S&P, Moody’s or Fitch Ratings. SPSK has a gross expense ratio of 0.65%.

Notably, sukuks are financial certificates similar to bonds and are issued in global markets. They are structured to comply with Islamic religious laws and investment principles.

ETF Competitors

Notably, the first Shariah-compliant U.S. equity ETF, Wahed FTSE USA Shariah ETF (HLAL), was launched by Wahed investin July 2019. The fund replicates the total return performance, before fees and expenses, of the FTSE USA Shariah Index (read: Wahed Invest's Shariah-Compliant US Equity ETF Makes Debut).

Along with HLAL, the fund competes with a couple of other ETFs focused on religious values.

Wahed FTSE USA Shariah ETF HLAL

HLAL provides exposure to large and mid-cap U.S. companies that comply with Shariah principles. The fund is listed on Nasdaq. The FTSE Shariah USA Index constitutes companies within the FTSE USA Index, which conform to its screening criteria to evaluate the Shariah status based on business activities and specific financial ratios.

With AUM of $23.4 million, this fund provides exposure to a basket of 225 securities. The product charges 50 bps in annual fees. It has rallied 10.1% since launch in July 2019.

Global X S&P 500 Catholic Values ETF CATH

The fund delivers investment results that replicate the price and yield performance, before fees and expenses, of the S&P 500 Catholic Values Index. The companies involved in activities alleged to be non-conforming to Catholic values as set out by the U.S. Conference of Catholic Bishops, including screens for weaponry and child labor, are excluded by this fund.

With AUM of $303.7 million, this fund provides exposure to a basket of 455 securities. The product charges 29 bps in annual fees. It has rallied 29.2% in the past year.

Inspire 100 ETF BIBL

The fund invests in the most inspiring, biblically-aligned large-cap companies in the United States and is managed according to biblically responsible investing standards. The fund picks companies using the Inspire Impact Score methodology. The methodology selects companies involved in activities like working to cure cancer, providing clean water solutions and otherwise being a blessing to their communities, customers, workforce and the world around. Companies involved in unethical activities like abortion, pornography and human trafficking are not eligible to be included in this fund.

With AUM of $97.5 million, this fund provides exposure to a basket of 101 securities by tracking the Inspire 100 Index. The product charges 35 bps in annual fees. It has gained 28.6% in the past year.

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