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US: With eyes on
the Shariah dollar and looking to broaden the Islamic investment
universe, Seattle-based Falah Capital will later today launch a Shariah
compliant exchange-traded fund (ETF) to be listed on the New York Stock
Exchange (NYSE), IFN can exclusively reveal. Known as Falah
Russell-IdealRatings US Large Cap ETF (NYSE Arca ticker: FIA), the fund
is designed to allow global investors access to a portfolio of well-known
US companies, which have been screened for their ethical and financial
dealings, and to provide a full physical replication of the
Russell-IdealRatings Islamic US Large Cap Index.
The addition of FIA into the Islamic funds markets is indeed timely as
there is a lack of options available for investors seeking exposure to
foreign markets due to the sector being disproportionately skewed towards
the domestic markets of Malaysia and Saudi Arabia. In enhancing
international tradability of Islamic funds, Thom Polson, the co-founder
of Falah Capital, explained to IFN that: “Creating Shariah compliant ETFs
and placing them on the NYSE is a potential solution to facilitate a more
global Islamic funds industry. More importantly, Islamic investors in the
US are very active and in a market as big as the US, adding more products
will not only build awareness among American investors but also bring
more diversity to the Islamic funds market.”
As the first US-domiciled fund to be supervised for Shariah compliance by
a GCC-based Shariah advisor (Shariyah Review Bureau), the fund is
strategically positioned in the US as an ethical and value-based offering
to appeal to a wider pool of investors in line with the theme of global
tradability. Building on that, the decision to partner with
Russell-IdealRatings Islamic Index was one made with both Shariah
credibility and effective distribution in mind. “Being linked to the
Russell-IdealRatings Islamic Indexes has been a tremendous benefit as it
provides the broadest market coverage and is the only Islamic index to
have a third-party Shariah auditor,” explained Polson.
Comparing the Shariah indexes of Dow Jones, FTSE, S&P and MSCI,
Russell-IdealRatings leads in the number of securities at over 3,654,
across 49 jurisdictions. Russell Investments in a landmark study released
this week also confirmed that based on the back-tested historical
performance of the Russell-IdealRatings Islamic US Large Cap Index, the
Shariah index would have outperformed the Russell 1000 Index over the
period of the 31st July 2006 to 30th June 2014 on a
cumulative basis. “It is notable that this outperformance occurred even
with the application of dividend purification to the total return of the
compliant fund,” commented the report.
“We see it as a natural progression for institutions especially, in
Muslim-majority countries, to seek out Shariah compliant products that
have a conventional level of efficiency. We are excited to be a part of
the rapidly growing Islamic investment industry, which should bring in
new participants in the near future,” said Polson.
This smart beta play fund (as termed by ETF.com), is a culmination of
close collaboration with Exchange Traded Concepts, Russell Indexes,
IdealRatings, Shariyah Review Bureau, KCG, Mellon Capital, and US Bank.
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