AMAL Shariah ETF: Screening and compliance
Part 1: Introduction to the Almalia Sanlam Active Shariah Global Equity UCITS ETF
Part 2: Portfolio construction and methodology
Part 3: AMAL Shariah ETF: Screening and compliance
Part 4: Why trade active ETFs?
Shariah compliant ETF: screening and compliance
The Almalia Sanlam Active Shariah Global Equity UCITS ETF (AMAL) fund aims to achieve capital growth over the
medium to long term, whilst complying with the principles of Shariah Investment.
A compliant Shariah investment must still qualify as a suitable investment as per the team’s
definition of quality. Thus, AMAL will
continue to invest only in companies that have the same quality characteristics
befitting of the Global High Quality team’s investment philosophy. The
exclusion of companies with excessive borrowing aligns well with one of the
main indicators of determining the quality of a company. The investment approach will not be
compromised, a feature that differentiates it from competitors and has contributed
to its current track record.
To ensure on-going compliance with the
Principles of Shariah Investment, our Active Shariah Global Equity UCITS ETF will be overseen by a Shariah Panel of
scholars from Amanie Advisors with deep expertise in Islamic Investments.
duties and responsibilities are to:
- Advise, on a non-discretionary basis, on the Shariah aspects of
- Issue an opinion, by way of a Fatwa, ruling or guidelines as to
whether the activities of the ETF comply with Shariah; and
- Make recommendations or provide guidance as to how the ETF could
be made Shariah compliant.
The methodology for the Shariah screen will follow Shariah
investment principles and does not allow investment in companies that are
directly active in, or derive more than 5% of their revenues from such business
activities as alcohol, tobacco, pork-related products, conventional financial
services, defence/weapons, gambling, or adult entertainment.
If a company derives part of its total income from interest income
and/or from prohibited activities, Sharia investment principles state that this
proportion must be deducted from the dividends paid out to shareholders and
given to charity. This is capped at 5% as in order for a company to be
shariah compliant, it cannot derive more than this number from prohibited
Therefore 5% of all dividends will be donated to charities
approved by our Shariah board. This list currently stands as follows:
Shariah principles do not allow investment in companies deriving significant
income from interest or companies that have excessive borrowing. There are
three ratios used to screen for such companies:
- total debt over total assets
- the sum of a company's cash and interest-bearing securities over
- the sum of a company’s accounts receivables and cash over total
assets. None of these financial ratios may exceed 33.33%.
Shariah and sustainable approaches to investing have developed independently,
both look to bias investment in more sustainable outcomes and can be aligned in
many ways. Many sectors that are
excluded under Shariah law also score poorly on sustainability criteria.
fundamental investors, Sanlam Investments has always considered carefully those
issues which may have an impact on the sustainability of returns over the
medium to long term. This covers a wide range of potential risks including
those coming under the Environmental, Social and Governance headings. With the
primary objective of producing superior financial returns for its clients, its investment
process takes ESG issues into account when they feel these may have a material
impact on investment risk or return. Sanlam Investments believe that over the
long term, integration of robust ESG policies make good business sense.
For more information, please visit the Fund page.