HSBC MSCI Europe Islamic ESG (HIEU)

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Brief information: HSBC MSCI Europe Islamic ESG UCITS ETF is an open-end, UCITS compliant ETF inco- rporated in Ireland. The Fund’s objective is to replicate the performance of the MSCI Europe Islamic ESG Universal Screened Select Index, while minimising as far as possible the tracking error between the Fund’s performance and that of the Index. The Index is a market-capitalisation weighted index.

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Introduction to HSBC MSCI Europe Islamics ESG (HIEU)

The HSBC MSCI Europe Islamic ESG (HIEU) is an exchange-traded fund (ETF) offered by HSBC. It aims to expose investors to European companies that comply with Islamic finance principles and prioritize environmental, social, and governance (ESG) factors

The ETF tracks the performance of the MSCI Europe Islamic ESG Leaders Index, which includes companies from developed countries in Europe that meet specific criteria related to Islamic finance principles and ESG considerations.

What are you investing in?

The Fund aims to track as closely as possible the returns of the MSCI World Islamic ESG Universal Screened Select Index (the Index) while integrating environmental, social and governance (ESG) metrics. The Fund will invest in or gain exposure to shares of companies which make up the Index. The Fund qualifies under Article 8 of SFDR.

The Index is a subset of the MSCI Europe Islamic Index (Parent Index). It is made up of large and mid-cap companies (as measured by the market value of their shares) across 15 developed markets countries that comply with Shariah investment principles as defined by the Index Provider.

Top 10 Holdings	% of TNA
Novartis	5.15
Shell	4.80
Sap Se	4.77
L’oreal Sa	4.54
Total energies Se	4.10
Schneider Electric	4.02
GSK	3.69
Sanofi Sa	3.60
Bp PLC	2.84
Essilorluxottica sa	2.78

How do you grow your money by investing in  HSBC MSCI Europe Islamics ESG (HIEU)?

By investing in the HSBC MSCI Europe Islamics ESG (HIEU) fund, individuals can grow their money while promoting environmental and social causes. The fund replicates the performance of an index that screens out harmful activities and prioritizes companies with strong ESG ratings. HSBC actively engages with companies on ESG issues, ensuring that the fund’s investments align with sustainable objectives. Investing in HIEU allows individuals to achieve financial growth while making a positive impact.

What makes HSBC MSCI Europe Islamic ESG (HIEU) Shariah Compliant?

Sharia investment principles do not allow investment in companies which are directly active in, or derive more than 5% of their revenue (cumulatively)2 from the following activities (“prohibited activities”): 

• Alcohol
• Adult Entertainment
• Cinema
• Conventional Financial Services1
• Defense / Weapons
• Gambling / Casino
• Hotels
• Music
• Online Dating2
• Pork related products
• Tobacco

For Financial  Screening

Sharia investment principles do not allow investment in companies deriving significant income from interest or companies that have excessive leverage. MSCI uses the following three financial ratios to screen for these companies:

• Total debt over total asset
  33.33% 30.00%
• Sum of cash and interest-bearing securities over total assets
  33.33% 30.00%
• Sum of accounts receivables and cash over total assets
  33.33% 30.00%

ESG rating of HSBC MSCI Europe Islamic ESG (HIEU)

ESG Overall Score: 83
Environmental Score: 79	Social Score: 86	Governance Score: 81
Controversies score: 52

The HSBC MSCI Europe Islamic ESG (HIEU) ETF has an overall ESG score of 83, which indicates a relatively high level of environmental, social, and governance performance compared to its peers. The environmental score is 79, suggesting that the companies included in the ETF demonstrate good environmental practices. The social score is 86, indicating strong performance in social factors such as labour practices, human rights, and community engagement. The governance score is 81, highlighting the companies’ adherence to sound governance principles. However, the controversies score is 52, suggesting that there may have been some controversies or issues associated with the companies in the ETF. Overall, the HIEU ETF demonstrates a favourable ESG profile, but it’s essential to consider the specific factors and controversies that contribute to the scores when making investment decisions.

Analysis	Over a six-month
Sharpe Ratio	0.01
Information Ratio	-0.02
Risk Reward Ratio	0.05
Alpha	-0.01
Beta	1.05
R2	0.85

• Sharpe Ratio Conclusion of HIEU: 

This ratio measures how much reward you’re getting for each unit of risk. The higher the number, the better the risk-reward trade-off. Lower values indicate that the investment may not be worth the risks involved.

The HIEU has a Sharpe Ratio of 0.1% over six months. This indicates that the investment’s risk-adjusted return is relatively low.   

• Information ratio Conclusion of HIEU:

The Information Ratio measures the risk-adjusted performance of an investment relative to a benchmark index. A negative Information Ratio of -0.02% for the HSBC MSCI Europe Islamic ESG (HIEU) ETF over six months suggests that the fund’s returns have underperformed its benchmark index.

• Risk Reward Ratio Conclusion of HIEU:

This is like the “value for money” metric of investing. A positive number means you get more rewards (returns) than risks, which is generally a good sign.

The Risk-Reward Ratio is a measure that assesses the potential return of an investment relative to its level of risk. A Risk-Reward Ratio of 0.05% for the HIEU over six months suggests that the possible return of the fund relative to its level of risk is relatively low.

• Alpha conclusion of HIEU:

Alpha is like your “extra credit” in school. If the benchmark index (against which HIEU is compared) increases by 5%, and HIEU generates a return of 6%, the additional 1% is the Alpha. The six-month alpha of -0.01 for the HSBC MSCI Europe Islamic ESG (HIEU) ETF suggests that the fund’s returns have underperformed its expected returns based on its level of risk.

• Beta Conclusion of HIEU:

Beta tells us how closely HIEU follows its benchmark index. If the index goes up or down, we can expect HIEU to behave similarly. A Beta close to 1 means it’s behaving almost exactly like its benchmark.

A beta of 1.05% for the HIEU over six months indicates a slightly higher volatility than its benchmark. In this case, the beta above 1 suggests that the investment may have exhibited slightly higher volatility than the benchmark during that period.

• R-Square Conclusion of HIEU:

An R-Squared close to 1 means that most of HIWO’s performance can be explained by its benchmark’s performance. This is useful to know if you are considering whether to invest in WSHR or just stick with a fund that tracks its benchmark.

The six-month R-squared (R^2) value of 0.85 for the HSBC MSCI Europe Islamic ESG (HIEU) ETF indicates a relatively high correlation between the fund’s returns and its benchmark index or target factors.

Is HIEU regulated?

HIEU is regulated by being listed on the London Stock Exchange.

Conclusion

The HIEU ETF offers Muslim investors an opportunity to invest in a diversified equity portfolio of European companies that adhere to Islamic principles and incorporate ESG considerations.

The positive Alpha of 0.01% suggests a slight excess return compared to its benchmark index over a specified time, indicating potential value added by the fund’s investment decisions.

The Beta of 1.02% indicates slightly higher volatility for the HIEU ETF than its benchmark. This means that the fund’s returns may experience greater fluctuations relative to the overall market movements.

The Sharpe Ratio of 0.1% indicates a relatively low risk-adjusted return over the specified time period. This ratio measures the excess return earned per unit of risk taken by the fund. A higher Sharpe ratio generally indicates better risk-adjusted performance.

It’s important to note that this analysis is based on the limited information provided, and a more comprehensive evaluation would require additional data and context. Factors such as expense ratio, historical performance, and alignment with investment goals and risk tolerance should also be considered.

Happy Investing!