There Were No ETFs For Islamic Investors in Canada. So We Built One
To make Canada’s first Shariah-compliant ETF, we started with our smart investment strategies and added stringent filters to make sure every company we invest in fits with Muslim values.
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You may have noticed that there’s been an explosion of ETFs available on the market in the last few years. There’s good reason for that. ETFs — that stands for exchange-traded funds, which are essentially a bundle of different stocks and bonds you can buy like any other stock — charge fewer fees. The problem was that there were exactly zero ETFs built for observant Muslims that you can buy and sell on a Canadian stock exchange. So Muslims living in Canada who wanted to invest according to their Islamic faith didn’t have a lot of options. Until now.
We’re proud to introduce our newest fund: the Wealthsimple Shariah World Equity Index ETF. We put our brainiest Wealthsimple investing minds together with S&P and Dr. Mushtaq Shah, the CEO of Ratings Intelligence Partners, from the Shariah advisory firm that specializes in this stuff. And we made an ETF that allows Islamic investors to put their money into a thoughtfully constructed investment fund designed to maximize their diversification while being compliant with shariah rules, including excluding haram (forbidden) industries or companies with unacceptable debt levels and impure interest income. And unlike most ETFs, we also avoid prohibited financial practices like derivatives trading or short-selling.
How we filter investments in the Wealthsimple Shariah World Equity Index ETF.
Shariah is based on the Qur’an (the Holy book for Muslims) and the Sunnah (the teachings of the prophet Muhammed), filtered through modern-day interpretations by prominent Shariah scholars and legal experts. So there’s a body of analysis that suggests which investments are, and are not, haram. To make sure our investments followed these rules, Dr. Shah and his team reviewed everything the fund invests in and how the fund operates to ensure it is Shariah-compliant. Then the team issued a certificate approving the ETF’s structure, and that certificate was reviewed and signed by a committee of Shariah scholars — an extra step of approval to backstop the work of Dr. Shah’s team. Called a Fund Fatwa, the certificate verifies Wealthsimple’s ETF as a Shariah-compliant fund.
Investors in the fund can be certain our ETF strictly follows the following rules:
The fund will invest only in stocks that have been screened by the Shariah Supervisory Board.
Because the concept of interest violates Shariah, the fund will not invest in companies linked to interest-based financial services such as banks. Nor will it invest in interest-bearing money market instruments, maintain its cash balances in interest-bearing accounts, take out loans that require interest payments, or lend its assets for a fee or commission.
Likewise, it won’t invest in companies engaged in the following businesses: the production of alcohol or pork, gambling, adult entertainment, and other content that violates the moral code of Shariah.
The fund will not use derivative instruments (most ETFs do) or engage in short-selling strategies.
The fund’s returns will be shared equitably among its investors. We will not offer preferential returns to any one group of investors over any other.
It doesn’t end there.
Sometimes the companies the fund invests in change (in markets, nothing stays the same, so this is important). So every quarter, we will review our investments so we can remove companies that are no longer Shariah-compliant and add any that may have become compliant. And a couple times a year, Dr. Shah’s team will conduct audits of the fund’s operations to make sure the way the fund itself operates continues to be compliant. The audit process will make sure any inadvertently non-compliant transactions are corrected.
And so, with peace of mind, we think it’s a good time to try a low-fee, highly principled, and diversified way of investing.
The Wealthsimple Shariah World Equity Index ETF trades on the NEO exchange under the ticker WSHR. For a set-it-and-forget-it investment portfolio personalized to you and your financial goals, all you need to do is sign up for a Wealthsimple Invest account and choose the Halal Investment Portfolio when prompted. Your portfolio will include the new ETF, as well as cash and gold (via a Shariah-certified gold ETF) to mitigate the risk — how much of each will depend on how much risk you decide to take on.
You can also buy WSHR pretty much anywhere you buy ETFs — including on Wealthsimple Trade, where you’ll pay zero commission fees.
Disclaimer: Commissions, management fees, brokerage fees, and expenses may all be associated with Exchange Traded Funds. Please read the prospectus before investing. Exchange Traded Funds are not guaranteed, their values change frequently and past performance may not be repeated.
For more information about the Wealthsimple Shariah World Equity Index ETF and the risks associated with this type of ETF, please see the WSHR Prospectus here.
The "Dow Jones Islamic Market Developed Markets Quality and Low Volatility Index" is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Wealthsimple Inc. (“Wealthsimple”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Wealthsimple. Wealthsimple Shariah World Equity Index ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones,S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Dow Jones Islamic Market Developed Markets Quality and Low Volatility Index.
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