Wealthsimple has launched a new investment portfolio dedicated to Muslim clients that avoid investing in business sectors like alcohol, tobacco, and gambling.
The new portfolio, called Wealthsimple Halal Investing, uses the same passive investment strategy as Wealthsimple’s other portfolios. Wealthsimple said that it has designed the Halal Investing portfolio using a methodology approved by global data index MSCI’s committee of Shariah scholars.
The all-equity portfolio is comprised of 50 stocks designed to maximize diversification and closely track the MSCI ACWI Islamic Index.
“It’s something we’ve been discussing internally for a while now,” said Yasser Mawji, Wealthsimple’s Head of Research that developed the portfolio. “There are only a few Islamic investment options, and most of them have high minimums and high fees, so aren’t accessible to many investors.”
The stocks included in the portfolio were filtered using two screening processes: a business activity screen and a financial screen. The business activity screen filters companies that are directly active in — or derive over five percent of their revenue from — an activity prohibited by Islamic principles like alcohol, tobacco, gambling, or pork production. The financial screen filters out companies that derive significant income from interest, or have considerable leverage.
“Profiting off interest — usury — is prohibited by Islamic law. That means most fixed-income investments like bonds, which earn interest, are off-limits, as are companies that derive significant income from interest or have excessive leverage,” said Mawji.
“We want to enable everyone to live their best financial lives by making really great financial products and advice simple and accessible,” said Michael Katchen, CEO and co-founder and Wealthsimple. “A lot of the common financial products are off the table for observant Muslims, and many of the available options are expensive or have high minimums. We wanted to offer a portfolio that had all the benefits of our other portfolios while being compliant with Islamic investing practices.”