Islamic finance house Almalia has teamed up with investment manager Sanlam and white-label ETF issuer HANetf to launch the world’s first actively managed ETF to adhere to Sharia (also known as “Shariah” or “Shari’a”) principles.
Paul-David Oosthuizen, CEO of Almalia.
The Almalia Sanlam Active Shariah Global Equity UCITS ETF has listed on the London Stock Exchange (AMAL LN / AMAP LN) and is expected to cross-list on Borsa Italiana (AMAL IM) and Xetra (ASWE GY) in the coming weeks.
It comes with an expense ratio of 0.99%.
London-headquartered Almalia, which also maintains a presence in the UAE, was founded to develop wealth products that comply with Islamic law. The newly launched ETF appears to be its first product.
Commenting on the launch, Paul-David Oosthuizen, CEO of Almalia, said, “We are proud to be the first to launch an actively managed Shariah-compliant global equities ETF. Our team is passionate about values-based investing and providing innovative solutions to underserved investors. This ETF may be suitable for investors looking for an actively managed strategy with a focus on good governance, as well as those who wish to invest in a Shariah-compliant way.”
Sanlam Investments UK has been appointed as the fund’s sub-advisor with Pieter Fourie, Sanlam’s Global Head of Equities, leading the portfolio management team.
Fourie will manage the ETF in line with Sanlam’s Global High Quality Strategy which seeks capital growth over the medium to long-term by investing in 20-35 companies with strong growth prospects, durable business models, and sustainable revenue and free cash flow. Up to 30% of the portfolio may be allocated to emerging markets.
The strategy has performed well since the inception of the £1.8bn Sanlam Global High Quality Fund, which does not utilize Sharia screening, in February 2014. It has outperformed the MSCI World, recording an annual gain of 13.1% compared to 11.9% for the benchmark (performance stated in GBP terms).
Before securities are added to the portfolio, a Sharia investment committee, consisting of a panel of scholars from Amanie Advisors, a global provider of Islamic banking and finance advisory services, will provide additional oversight to ensure compliance with Islamic law.
Sharia screening typically excludes companies operating in non-compliant areas such as alcohol, tobacco, pork, pornography, gambling, cloning, and banking, as well as finance (except specific Sharia-compliant institutions) and advertising and media (except certain news and sports segments).
Companies may also be dropped due to financial ratios that violate compliance measurements. Three areas of focus are typically leverage, cash, and the share of revenues derived from non-compliant activities.
Fourie commented, “It is an incredibly exciting opportunity and privilege to manage the world’s first actively managed Shariah-compliant ETF. The launch allows us the opportunity to demonstrate that active management using high quality-based investment principles within the parameters of a Shariah-compliant universe can add significant value to investors.
“With this fund launch, we believe an underserviced market can be given a better outcome by following the same strategy as our Global High Quality Fund which invests in businesses that have durable business models, wide economic moats, and the ability to deliver significant shareholder value over the long term.”
Nik Bienkowski, Co-CEO of HANetf added, “We are delighted that Almalia chose us to help them develop and launch the world’s first actively managed Shariah-compliant ETF. Active ETFs are currently relatively few in number but represent a huge growth opportunity. ETFs have firmly established their credentials for basic beta exposure, and tomorrow’s battlegrounds are thematic, smart beta, and ultimately active strategies. As the ETF industry continues to enjoy strong growth, more active fund managers are looking to enter the sector and we look forward to helping them bring their strategies to the European market.”