Toronto-based Wealthsimple has revealed plans to launch an exchange-traded fund (ETF), which the startup says will offer investors access to a diversified index of Shariah-compliant stocks.
“Canadians should be able to invest according to their values without compromising access to some of the best investment products.”
– Ben Reeves
Toronto-based Mackenzie Investments, a subsidiary of Montreal-headquartered Power Corporation (which owns a majority stake in Wealthsimple), will serve as the fund’s trustee, ETF manager, and portfolio manager. The Wealthsimple Shariah World Equity ETF, as it is set to be called, is expected to be listed in early 2021.
Wealthsimple is the latest Canadian FinTech startup pushing into the emerging sector of Islamic finance, a branch of finance that seeks to conform with the ethical and religious obligations of the Islamic faith.
In 2017, Toronto-based Manzil was launched to provide halal financial solutions including mortgages. Manzil calls itself “Canada’s first neo bank offering halal-certified products,” and aims to help Canadian Muslims balance their financial needs with their ethical and spiritual obligations.
Earlier this year, Manzil launched a partnership with fellow Toronto-based FinTech startup, Koho, to give Muslims and non-Muslims a halal prepaid Visa card.
Shariah-compliant funds are investment funds governed by the requirements of Shariah law and the principles of the Muslim religion. These funds are considered to be a type of socially responsible investing, and often involve participatory rather than predatory terms, and avoiding business sectors like alcohol, tobacco, and gambling. Notably, MacKenzie and Wealthsimple partnered in June to offer ETFs focused on socially responsible investing.
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“Canadians should be able to invest according to their values without compromising access to some of the best investment products at competitive prices,” said Wealthsimple’s chief investment officer Ben Reeves. “Our mission is to give everyone, regardless of beliefs, access to financial freedom. Today, Shariah-compliant self-directed investment options are limited and expensive, and we saw an opportunity to change that.”
In a statement sent to BetaKit, Manzil CEO Mohamad Sawwaf called the launch of Wealthsimple’s ETF a “great step” towards building the Islamic finance space in Canada.
“I commend WealthSimple for taking the bold initiative of creating solutions that serve the needs of this underbanked community,” said Sawwaf. “More work needs to be done in the space, including this to-be-launched ETF, to come up with solutions which solve much more complex problems than Shariah branding.”
“This should also provide proof to all levels of government that Shariah-compliant financial solutions can be created under the current regulatory frameworks without compromising these religious principles,” Sawwaf added.
Wealthsimple said the ETF will comprise a diversified basket of Shariah-compliant stocks that are screened and certified on a quarterly basis to ensure they align with Shariah principles.
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The fund will invest primarily in equities of companies in North America, Europe, Australia, and Asia, with the goal of achieving diversified access to companies in compliance with Shariah principles.
Notably, however, Wealthsimple’s ETF has not been certified by a third party to be compliant with Shariah law, according to a long-form prospectus filed by MacKenzie. MacKenzie stated in the document that it gives “no assurances that the Wealthsimple ETF is compliant with Shariah law.”
A spokesperson for Wealthsimple told BetaKit Wealthsimple’s ETF will take steps to be compliant with Shariah. They added that the company worked with S&P, which itself works with Shariah scholars and Shariah financial advisory firm Ratings Intelligence Partners, to ensure the fund’s stocks are Shariah-compliant.
This is not the first time Wealthsimple has ventured into Islamic finance. In 2017, the startup launched a halal investment portfolio of 50 stocks intended to help Muslims invest in accordance with religious principles.
Image source Unsplash. Photo by Damir Spanic.