What is halal investing?
Halal investing is investing in companies that are in line with Islamic principles of investing. A lot of conventional investment products aren't compliant. For example, profiting off debt is prohibited, so bonds and GICs are off the table for observant Muslims. Additionally, halal investing prohibits businesses that profit off certain activities, including alcohol, tobacco, gambling, pork, and weapons, among others.
What's currently included in the Halal Investing portfolio?
The Halal Investing portfolio includes 50 stocks selected to track the broad market as closely as possible to maximize our clients’ diversification, while complying with Islamic law. You can see the entire list of stocks here.
In Q2 2021, we’re going to make updates to the existing Halal portfolio to improve diversification and risk management. The updated portfolio will include both gold and our new Shariah-compliant Wealthsimple World Equity Index ETF. It may also include non-interest bearing cash, depending on your risk level.
The portfolio migration will happen some time in Q2 2021. Rest assured, we will communicate with all existing Halal clients about the migration as it happens.
Can you tell me more about Wealthsimple’s new Equity Shariah-compliant ETF?
The Wealthsimple Shariah World Equity Index ETF (WSHR) will be passively managed and closely track the Dow Jones Islamic Market Developed Markets Quality and Low Volatility Index. The fund will be comprised of high quality Shariah-compliant developed market stocks in a broad set of sectors.
How can I be confident that the portfolio and ETF is Shariah-compliant?
Just like your existing halal portfolio, all of the investments in your portfolio will be screened by a third party Shariah compliance advisory firm.
Does the Halal Investing portfolio use bonds?
No. Conventional Bonds pay interest, which is not allowed under Islamic law. The Halal Investing portfolio uses non-interest-bearing cash and gold as diversifying assets where appropriate.
Have you considered including Sukuk (Shariah-compliant bonds) in the Halal portfolios ?
Yes, we have considered Sukuk, as they have bond-like properties and lower risk levels, so they are an attractive potential diversifier. However, we currently have reservations about the liquidity and risk exposures of the Sukuks. Additionally, there are no reasonable or viable options available on the market except for a US listed Sukuk ETF, which is denominated in US Dollars and adds significant currency risk to the portfolios. We will replace cash with the Sukuk if a reasonable or viable option becomes available.
Is the gold portion in compliance with Shariah investing principles?
Yes. Any gold in your portfolio is added via an exchange-traded fund (ETF) that holds physical gold. A reputable shariah advisory firm reviewed the fund structure and documentation, and issued a Fatwa to certify that the fund complies with Shariah principles' requirements and the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) Shariah Standard on Gold.
Do you offer Dividend Purification?
Yes, dividend purification information is calculated by a third-party and is published on our website on a quarterly basis ahead of distributions.
Why is the price increasing?
The price is increasing so that we’re able to provide Shariah compliant investors with the same service that we provide other Wealthsimple Invest clients. Wealthsimple clients pay two fees for our passive investment portfolios: A 0.4-0.5% management fee for our investment service, which includes portfolio management, rebalancing and financial advice; and a management expense ratio (MER) fee for the ETFs that are held within our portfolios. The MER covers the management and operational costs of the ETFs in our portfolios and are charged by the ETF managers, or in some cases Wealthsimple.
Today, our Halal portfolios only consist of stocks and therefore are not subject to MER fees. We’re changing this because we believe that the diversification of our Halal portfolios can be greatly improved by adding non-interest bearing cash, gold through a Shariah compliant gold ETF and global stocks through the new Wealthsimple equity ETF. The fee for the gold ETF is 0.18%, and the fee for the equity ETF is 0.5%. As more Shariah ETFs become available that are suitable for our investors, we will consider adding them to our portfolios.
Will I still need to hold part of my cash outside of Wealthsimple to keep my investment in line with my risk profile?
No. As a result of these changes, our investment team will be responsible for your entire portfolio, including the cash side. Thus, following a strong market fluctuation, we will take care of rebalancing your portfolio according to your investment objectives. You won't need to worry about it anymore.
If I don’t want to move to the updated portfolio, what are my options?
Once we’ve moved clients over to the updated portfolio, we will be discontinuing the old Halal portfolio. The new Wealthsimple ETF will be available on Wealthsimple Trade, which is our commission-free stock trading platform with no account minimums or management fees.
Will the Wealthsimple Shariah ETF be available on Wealthsimple Trade?
Yes, the Wealthsimple Shariah World Equity Index ETF (WSHR) will be available on Wealthsimple Trade and other online brokerages.
As with all our portfolios on Wealthsimple Invest, we aim to provide suitable and diversified products that will help our clients reach their financial goals. In addition to a better risk managed portfolio, Wealthsimple Invest clients have access to our portfolio management team for financial advice. If you are considering transferring your Halal portfolio to Wealthsimple Trade, we recommend that you speak to a portfolio manager about your financial situation to determine what decision is best suited for you.