HSBC MSCI World Islamic ESG (HIWO)

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Brief information: HSBC MSCI World Islamic ESG UCITS ETF is an open-end, UCITS compliant ETF incor- porated in Ireland. The Fund’s objective is to replicate the performance of the MSCI World 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 World Islamic ESG (HIWO)

HSBC MSCI World Islamic ESG (HIWO) is an investment product offered by HSBC that combines Islamic finance principles, environmental, social, and governance (ESG) considerations, and exposure to global equity markets. It allows investors to align their investments with Islamic principles, incorporate ESG factors, and invest in a diversified portfolio of global equities.

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 World Islamic Index (Parent Index). It is made up of large and mid-cap companies across 23 developed markets countries that comply with Shariah investment principles, as defined by the Index Provider.

Top 10 Holdings	% of TNA
Microsoft Corp	13.18
Johnson & Johnson	3.60
Merck Corp	3.46
Shell PLC	2.54
Novartis	2.45
Cisco Systems	2.43
Danaher Corp	2.28
Procter & Gamble	2.25
Pfizer	2.22
Tesla Inc	2.00

How do you grow your money by investing in HSBC MSCI World Islamic ESG (HIWO)?

By investing in the HSBC MSCI World Islamic ESG (HIWO) 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 HIWO allows individuals to achieve financial growth while making a positive impact.

What makes HSBC MSCI World Islamic ESG (HIWO) 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 World Islamic ESG (HIWO)

ESG Overall Score: 80
Environmental Score: 76	Social Score: 84	Governance Score: 76
Controversies score: 51

The HSBC MSCI World Islamic ESG (HIWO) fund has a mixed ESG rating. It demonstrates an excellent overall score of (80), with solid performances in social (84) and governance (76) factors. However, its environmental score is (76), indicating room for improvement. The controversies score is (51), suggesting some incidents or controversies. Further research is recommended to understand the fund’s specific ESG practices and alignment with individual values and goals.

Analysis	Over a six-month
Sharpe Ratio	0.1
Information Ratio	0.05
Risk Reward Ratio	0.13
Alpha	0.01
Beta	1.02
R2	0.9

• Sharpe Ratio Conclusion of HIWO: 

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 HSBC MSCI World Islamic ESG (HIWO) has a Sharpe Ratio of 0.1% over a six-month period. This indicates that the investment’s risk-adjusted return is relatively low.   

• Information ratio Conclusion of HIWO:

The Information Ratio is a measure of the excess return generated by an investment relative to a benchmark per unit of active risk taken. It is calculated by dividing the excess return by the tracking error, which represents the volatility of the active return.

The HSBC MSCI World Islamic ESG (HIWO) has an Information Ratio of 0.05% over a six-month period. This suggests a slight excess return relative to the benchmark, considering the level of active risk taken.

• Risk Reward Ratio Conclusion of HIWO:

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-Return Ratio for the HSBC MSCI World Islamic ESG (HIWO) over a six-month period is 0.13%. This indicates a positive relationship between the investment’s return and its level of risk, suggesting a relatively higher return given the risk taken.

• Alpha conclusion of HIWO:

Alpha is like your “extra credit” in school. If the benchmark index (against which HIWO is compared) increases by 5%, and HIWO generates a return of 6%, the additional 1% is the Alpha. The HSBC MSCI World Islamic ESG (HIWO) has achieved an alpha of 0.01% over a six-month period. This indicates a small positive excess return relative to its benchmark during that timeframe.

• Beta Conclusion of HIWO:

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

A beta of 1.02% for the HSBC MSCI World Islamic ESG (HIWO) over a six-month period indicates a slightly higher volatility compared to its benchmark. In this case, the beta being slightly above 1 suggests that the investment may have exhibited slightly higher volatility than the benchmark during that period.

• R-Square Conclusion of HIWO:

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.

An R-squared (R2) value of 0.9% for the HSBC MSCI World Islamic ESG (HIWO) over a six-month period indicates a strong correlation between the investment’s returns and the returns of its benchmark.This indicates that the HIWO closely tracks the performance of the benchmark, reflecting a strong relationship between the two.

Is WSHR regulated?

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

Conclusion

In conclusion, the HSBC MSCI World Islamic ESG (HIWO) offers Muslim investors an opportunity to invest in a global equity portfolio that aligns with Islamic principles and incorporates environmental, social, and governance (ESG) considerations.

The fund’s Sharpe Ratio of 0.1% suggests a relatively low risk-adjusted return over a six-month period. The positive Alpha of 0.01% indicates a slight excess return compared to its benchmark, while the Beta of 1.02% suggests slightly higher volatility compared to the benchmark. The R-squared value of 0.9% indicates a strong correlation between the fund’s returns and those of its benchmark.

It’s important to note that these conclusions are based on the limited information provided, and a more comprehensive analysis would require additional data and context. Investors should consider factors such as the fund’s expense ratio, historical performance, and its alignment with their investment goals and risk tolerance.

As with any investment, it is recommended to carefully evaluate the performance, risk profile, and suitability of HIWO based on individual circumstances and consultation with a financial advisor.

Happy Investing!