Less than a month after Javelin Exchange Traded Shares (JETS) launched the first Shari’ah compliant ETF in the U.S., UM Financial and Jovian Capital are reportedly teaming up to do so in Canada. The proposed ETF would track the S&P/TSX 60 Shariah Index, a benchmark introduced by Standard & Poor’s just last week. Consistent with Islamic law, the index excludes companies engaged in firearms, gambling, conventional financial services, and pork products.
At present, there are multiple mutual funds that invest exclusively in Shari’ah compliant securities, but they are yet to attract significant assets. While the proposed ETF would certainly hope to attract funds from Canada’s Islamic population, it would also likely resemble a large cap global equity fund, and thus would hope to be an attractive option to other investors as well. Shari’ah compliant ETFs are becoming popular investment options around the world – over the last year they have been introduced in Britain, India, Singapore, Malaysia, and South Africa. In addition to the Islamic Market funds that have been introduced, FaithShares Advisors has filed with the SEC to launch a complete line of faith-based funds, including ETFs focusing on Catholic, Baptist, Lutheran, and Methodist values, among others. Whether these “religious ETFs” have lasting appeal or are simply the latest flash in the pan idea remains to be seen. Many of the major players in the ETF industry have no plans to enter the space. Barclays Canada, which administers iShares ETFs “has no plans to go down this route,” said Oliver McMahon, director of product development. “It’s not in our existing product pipeline.”
Disclosure: No positions at time of writing.