Saturna Capital has taken over the management of the Almalia Sanlam Active Shariah Global Equity UCITS ETF, an actively managed Shariah-compliant ETF originally launched by Islamic finance house Almalia and investment manager Sanlam in partnership with white-label issuer HANetf.
Scott Klimo, CIO of Saturna Capital.
Renamed the Saturna Al-Kawthar Global Focused Equity UCITS ETF, the fund is listed on the London Stock Exchange in US dollars (Ticker: AMAL LN) and pound sterling (AMAP LN), and on Xetra (ASWE GY) and Borsa Italiana (AMAL IM) in euros.
Washington state-based Saturna oversees more than $6 billion in assets and is one of the largest managers of Islamic-compliant assets in the US.
The firm made its European ETF debut in July through the HANetf platform with the launch of the Saturna Sustainable ESG Equity HANzero UCITS ETF (SESG LN), an actively managed sustainable global equity fund that incorporates carbon offsetting.
Investment approach
The fund, which is now managed by Jane Carten, Saturna CEO, Scott Klimo, the firm’s CIO, and Zahid Siddique, Portfolio Manager, will typically select 30 to 40 high quality, attractively priced global companies that are best-in-class on a variety of ESG, financial, valuation, and growth metrics.
Specifically, the managers seek out firms with robust balance sheets featuring minimal debt, strong cash flows above re-investment requirements, a record of intelligent capital allocation and healthy returns on capital, positive performance on ESG metrics, and sustainable competitive advantages.
The fund is overseen by a panel of Shariah scholars which reviews the proposed equity securities to ensure ongoing compliance with Islamic principles.
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.
A third (32.6%) of the ETF’s portfolio is currently allocated to US stocks with the next-largest country exposures being Switzerland (13.5%), the UK (10.1%), China (8.1%), and France (7.8%). Notable positions include Alibaba (8.1%), Samsung Electronics (7.1%), Taylor Wimpey (5.9%), Johnson & Johnson (5.6%), and Abbott Laboratories (5.2%).
The ETF has had its expense ratio reduced to 0.75% from 0.99%.
Jane Carten, CEO of Saturna Capital, said: “For several years investors from outside the US have asked how they could access our investment strategies, and we are excited to have this opportunity to offer an Islamic UCITs ETF to those investors.”
Scott Klimo, CIO of Saturna Capital, added: “Saturna believes including ESG factors in an Islamic portfolio further reduces risk, leading to more resilient portfolios and that companies proactively managing business risks related to ESG issues are more resilient and make better contributions to portfolios designed for patient investors. We are therefore delighted to launch the Saturna Al-Kawthar Global Focused Equity UCITS ETF to investors looking for an actively managed ethical fund that invests globally and is benchmark agnostic in terms of geographic and industry allocations.”
According to Hector McNeil, co-CEO of HANetf, while active ETFs still represent a small proportion of Europe’s total ETF market, the segment is attracting strong inflows as investors have sought out more types of investment strategies within the ETF wrapper.
McNeil said: “Active ETFs are the next frontier for the European ETF market. Regulators have played a major role in the rise of active ETFs in the US, and what happens in the US tends to follow here. Typically, the US is two to three years ahead in AUM growth and product innovation. If this is the case, then it’s only a matter of time before active ETFs become commonplace in Europe. Over the last two years, active ETFs have gone from nowhere to being the main battleground for providers in the US, and we expect that trend to follow to Europe.”