Barclays said on Monday its funds arm has launched the UK's first Shariah-compliant exchange-traded funds (ETFs) and that it has formed a panel of Islamic scholars to supervise such products.
Shariah forbids Muslims receiving interest payments and from investing in companies involved in the production or sale of pork, alcohol, tobacco, pornography, gambling and non-Islamically structured finance or life insurance. Barclays Global Investors (BGI) said the panel has issued a ‘fatwah’, or edict, on the three new ETFs, which will track MSCI indexes of Shariah-compliant companies.
These are the iShares MSCI World Islamic, which consists of 793 stocks; the iShares MSCI Emerging Markets Islamic, tracking an index of 306 stocks; and the iShares MSCI USA Islamic, with 276 stocks.
ETFs are index-based mutual funds that trade on exchanges like stocks and which offer investors exposure to a sector or market without the holder having to own the underlying asset.
They have become very popular in recent years, thanks to their low fees.
The panel, which comprises Islamic scholars Dr Mohammed Elgari, Sheikh Nizam Yacuby and Dr Abu Ghuddah, will certify that products are Shariah-compliant, provide advice on fund operations and investment methods, and carry out overall supervision of funds' compliance with Shariah principles. "This allows Barclays to operate more efficiently and more proactively in the Islamic finance space at a time when Islamic investors are increasingly moving assets from non-Shariah to Shariah investments," said BGI Europe vice-chairman Lindsay Tomlinson. "Islamic finance represents a very big opportunity for the London market, with a growth rate of around 10-15 per cent and a market size of 250 billion pounds."
Rory Tobin, head of iShares Europe, said BGI was looking at launching further Shariah-compliant ETFs.
"There are no definitive plans, but there is a significant menu of alternatives we can look at in the next six-to-twelve months," he said.
BGI had more than $2 trillion in assets under management as at end-June. (Reuters)