Invesco launches its first Shari’ah compliant UCITS ETF

Invesco has launched its first ETF in Europe that adheres to strict Shari’ah investment guidelines. The Invesco Dow Jones Islamic Global Developed Markets UCITS ETF is designed to follow an index that offers broad exposure to developed market equities while filtering out companies involved in certain business activities or with unacceptable debt levels or impure interest income.

Sign up to our free newsletters

Dr Chris Mellor, Head of EMEA ETF Equity and Commodity Product Management at Invesco

Dr Chris Mellor, Head of EMEA ETF Equity and Commodity Product Management at Invesco, said: “The growth of the European ETF market has been driven by the relatively low costs, transparency and liquidity provided by the simple fund structure, particularly relevant when tracking a benchmark. Momentum has accelerated further in recent years, with index houses and ETF issuers developing a wider range of exposures to meet the specific needs of different investors. We launched this ETF after consulting with investors to understand fully their financial objectives and key considerations such as income treatment and investment oversight.”

The Dow Jones Islamic Market Developed Markets Index excludes companies involved in alcohol, tobacco, pork-related products, non-Islamic financial services, weapons and defence, and entertainment. Companies are then evaluated according to several financial ratio filters to exclude any that have unacceptable levels of debt or impure interest income. The definitions and parameters of these screens are set by the Shari’ah Supervisory Board appointed by the index provider. The index is constructed by reweighting the remaining eligible securities by their market capitalisation, with the index rebalanced quarterly.

Invesco’s portfolio managers aim to achieve the fund’s objective by using portfolio modelling tools and techniques to buy and hold a proportion of the securities that represents the characteristics of the entire index. The objective of this sampling method is to replicate the index performance as closely as possible while reducing the costs normally incurred with full replication. The Investment Manager has also appointed an external advisory board to audit the fund; the Amanie Shari’ah Supervisory Board assess and confirm the compliance of the fund’s investments with Shari’ah.

Income and other profits that are accumulated within the ETF are not subject to purification prior to being reinvested in respect of those shares. For income purification purposes, investors in this fund may wish to make donations in accordance with the standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions.

ETF details

Source: ETFWorld.co.uk