iShares MSCI Emerging Markets ETF (ISDE)

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Brief information: iShares MSCI EM Islamic UCITS ETF is an exchange-traded fund incorporated in Ireland. The Fund aims to track the performance of MSCI Emerging Markets Islamic Index which comply with Shariah investment principles.

Introduction to iShares MSCI EM Islamic UCITS ETF:

The iShares MSCI EM Islamic UCITS ETF (ISDE) provides a solid vehicle for investing emerging market equities. The ETF provides a diverse portfolio of emerging market businesses that adhere to Islamic principles. ISDE enables Islamic investors to target a broad set of industries and businesses within the emerging markets that constitute the index. Hence, if one is seeking exposure to the risk-reward dynamics of emerging markets, ISDE is a reputed ETF that allows investors to buy in or exit with relative ease and low cost.

What are you investing in?

The iShares MSCI EM Islamic UCITS ETF (ISDE) provides exposure to companies in emerging markets that adhere to Islamic investment principles. The specific holdings and sector allocation of ISDE can vary over time, but it aims to capture the performance of the MSCI Emerging Markets Islamic Total Return Net Index. When evaluating ISDE, investors should consider the risks associated with emerging markets as well as the businesses and sectors that make up the index. Thorough research and consulting with a financial advisor are recommended.

Top 10 Holdings

Top 10 Holdings	Weight %
Samsung Electronics Co	14.04
Reliance Industries	5.07
Sk Hynx	2.84
Vale on	2.66
Al Rajhi Banking & Investment	2.09
Samsung Electronics Co Ltd	1.99
Posco Holdings	1.95
Petroleo Brasileiro Sa Petrobras	1.67
Samsung Sdi Co Ltd	1.54
Petroleo Brasileiro Sa Petrobras	1.46
Total	35.31

Collected Data of 18  August 2023

How do you grow your money by investing in iShares MSCI EM Islamic UCITS ETF (ISDE)

The primary objective of ISDE is to grow investors’ capital by investing in the constituents of the iShares MSCI EM Islamic MSCI UCITS ETF, thereby replicating its performance. The value of the fund’s investments will increase or decrease with the growth and earnings of the underlying businesses over time. When the underlying markets and companies grow ahead of expectations, there is potential for capital appreciation. Conversely, when they perform poorly, it could lead to poor returns. It is always worth considering what you are investing in and when, so as to increase your chances of positive returns. For example, buying into Emerging Markets following a deep market sell-off when expectations are very low could provide more favourable value as opposed to buying in when markets are exuberant or expensive.

What makes iShares MSCI EM Islamic UCITS ETF (ISDE) Shariah Compliant?

ISWD follows the methodology of MSCI when it comes to Shariah screening, and this involves two filters:

Business Activity Screening

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

• Alcohol
• Adult Entertainment
• Cinema
• Cannabis
• Conventional Financial Services1
• Defense / Weapons
• Gambling / Casino
• Hotels
• Music
• Online Dating
• 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:

Ratio	Islamic Index Series	Islamic Index M-Series
Total Debt	33.33%	33.33%
Sum of a company’s cash and interest‐bearing securities	33.33%	33.33%
Sum of a company’s accounts receivables and cash	33.33%	49.00%

Reference: https://www.msci.com/eqb/methodology/meth_docs/MSCI_Islamic_Indexes_Methodology_May2019.pdf

What’s the difference between the Islamic Index series and the Islamic Index M-Series?

Islamic Index Series uses Total assets as the denominator when calculating the financial screening. On the other hand, the Index M-Series uses the 36-month average Market capitalisation of the stock.

ESG rating of iShares MSCI EM Islamic UCITS ETF  (ISDE)

ESG Overall Score: 69
Environmental Score: 65	Social Score: 72	Governance Score: 67
Controversies score: 61

Collected Data of 18  August 2023, Reference: Refinitiv

The iShares MSCI EM Islamic UCITS ETF (ISDE) comes with an ESG report card and scores a 69, a solid B. This tells us that the companies within ISDE’s portfolio screen favourably on ESG (Environmental, Social, and Governance) principles.

Regarding the environmental category, with a score of 65, these companies show a commendable commitment to environmental stewardship. They focus on initiatives to reduce carbon emissions, conserve resources, and manage waste effectively. These efforts contribute to sustainable practices and the preservation of the environment.

With a score of 72 on the social front, these companies prioritise their wider stakeholders, treating employees well, promoting diversity and inclusion, engaging with local communities, and striving for positive social impact. These actions reflect their dedication to fostering a socially responsible business environment.

In terms of governance, these companies exhibit responsible behaviour with a score of 67. They adhere to good governance practices such as having transparent boards, fair executive compensation, and respecting shareholder rights. These practices contribute to the overall accountability and integrity of the companies.

However, the controversies score of 61 indicates that there have been occasional disputes or conflicts related to ESG issues among the companies in ISDE’s portfolio.

ISDE is an ETF that prioritizes ESG considerations, allowing investors to align their investments with their conscience.

Investment rating for iShares MSCI EM Islamic UCITS ETF  (ISDE):

Altar Score ISEM 0.0%

Category Average 7.7%

Collected Data of 18  August 2023

In comparison, the category average sits at a healthier 7.7%. This tells us that ISDE might not be the first choice for most investors, particularly those seeking higher returns. When an ETF gets an “AVOID” rating, it is placed in the “bottom 20%” category, indicating that the ETF might have stocks that haven’t performed well historically. As such, traditional analysis methods might be more suitable for evaluating ISDE’s investment potential.

However, it is important to note that this analysis primarily focuses on the profitability and growth potential of the companies within the ETF. While ISDE may not shine in this aspect, it could still offer strengths in other areas, such as aligning with specific investment strategies or ethical considerations. Therefore, investors should carefully consider their individual investment goals and preferences when assessing ISDE’s suitability for their portfolio.

Industry Sector

Name	Weight %
Technology	23.44
Basic Materials	19.96
Energy	14.66
Financials	7.81
Healthcare	7.42
Industrials	6.83
Consumer Cyclicals	6.75
Consumer Non-Cylclicals	6.3
Utilities	3.26
Telecommunication Services	1.36

Collected Data of 21 August 2023 Reference: IBKR

The iShares MSCI EM Islamic UCITS ETF is an investment fund designed to align with Islamic finance principles while providing exposure to emerging market assets. In this analysis, we’ll examine the ETF’s sector weightings, which reveal how it allocates assets across different industries within emerging markets. These allocations are key to understanding the fund’s investment strategy and potential areas of growth.

Technology (23.44%): This is the largest sector allocation, indicating a significant bet on technology companies in emerging markets. Technology tends to be a growth-oriented sector. However, it is worth noting that Samsung and Hynix – businesses that operate in semiconductor manufacturing – make a substantial proportion of this technology exposure.

Basic Materials (19.96%): The basic materials sector typically includes companies involved in mining, chemicals, and other raw materials. It’s a sizable allocation, which suggests the fund has exposure to commodities.

Energy (14.66%): Energy is another significant sector, and it often includes oil and gas companies. This allocation reflects the importance of energy in many emerging market economies.

This ETF invests in emerging markets. It’s big on tech and materials for growth but also spreads money across different sectors. Telecom gets the least attention. Depending on your goals, this could be a good fit.

Country Allocation

Name	Weight %
Korea	30.86
India	18.65
China	11.87
Saudi Arabia	9.2
Brazil	7.53
Taiwan	4.17
South Africa	3.48
Hong Kong	3.07
Malaysia	2.09
Mexico	1.45

Collected Data of 21  August 2023, reference: Refinitiv

The iShares MSCI EM Islamic UCITS ETF has the following country allocations within its portfolio:

Korea (30.86%): South Korea holds the largest share, indicating a significant investment in this market. This is worth noting because one would not naturally consider South Korea to be an Emerging Market, and having such a large position to this market may not be ideal for exposure to emerging markets.

India (18.65%): India is the second most substantial allocation, suggesting confidence in its growth prospects.

China (11.87%): China, a major emerging market, is also a significant part of the portfolio.

In summary, this allocation strategy reflects a balance between key Asian economies, like South Korea and India, and emerging markets in other parts of the world. It provides exposure to a variety of economies while aligning with Islamic finance principles.

Lipper Leader Rating

	Overall	3 Years	5 Year
Consistent Return	3 (1869 funds)	3 (1869 funds)	4 (1529 funds)
Preservation	3 (22997 funds)	4 (22997 funds)	4 (18369 funds)
Expense	5 (1827 funds)	5 (1827 funds)	5 (1492 funds)

Collected Data of 21  August 2023, reference: IBKR

Analysis of iShares MSCI EM Islamic UCITS ETF USD (ISDE)

Analysis	Over 1 Year	Over 3 Year
Sharpe ratio	0.05	0.01
Sortinio	0.04	0.01
Treynor ratio	0.38	0.06
Tracking error	2.46	2.02
Information ratio	-0.02	0.01
R/R Ratio	0.14	0.06
Alpha	0.02	0.03
Beta	0.78	0.83
Bear Beta	0.95	1.02
Bull Beta	0.74	0.73
R2	0.88	0.84
Adjusted R2	0.86	0.83
Value at Risk Normal	-8.59	-7.13
Value at Risk normal ETL	-10.98	-9.02
Value at Risk Quantile	-10.26	-10.3

Statistical Analysis	Over 1 Year	Over 3 year
Standard Deviation	19.79	15.62
CoVariance	33.64	20.11
Variance	32.64	20.32
Correlation	0.94	0.91
Downside Deviation Population	1.61	1.39
Semi Deviation	7.28	4.88
Semi Variance	52.98	23.83

Collected Data of 18  August 2023, reference: IBKR

• Sharpe Ratio (0.05% for 1 year and 0.01% for three years):

Think of the Sharpe Ratio as evaluating the smoothness of your drive. A positive Sharpe Ratio indicates a smoother ride with better returns. In this case, the Sharpe Ratios of 0.05% for one year and 0.01% for three years suggest that the investment has provided some positive returns relative to its Risk, although the performance has been modest.

• Sortino Ratio (0.04% for 1 year and 0.01% for three years):

The Sortino Ratio is similar to the Sharpe Ratio but focuses on severe rough patches during your ride. A positive Sortino Ratio suggests smoother performance during challenging conditions. These ratios of 0.04% for one year and 0.01% for three years indicate that the investment has shown some resilience during adverse conditions, but the performance remains relatively modest.

• Treynor Ratio (0.38% for 1 year and 0.06% for three years):

Think of the Treynor Ratio as evaluating the scenic views (returns) on your drive. A positive Treynor Ratio means you’re getting good returns considering the risks taken. The ratios of 0.38% for one year and 0.06% for three years suggest that the investment has delivered positive returns relative to its systematic Risk, with a more robust performance in the short term.

• Tracking Error (2.46% for 1 year and 2.02% for three years):

Tracking Error measures how much your investment’s route deviates from the average. A high Tracking Error means your investment has taken a significantly different path from others. These tracking errors of 2.46% for one year and 2.02% for three years indicate that the investment has deviated from its benchmark, reflecting its unique investment approach.

• Information Ratio (-0.02% for 1 year and 0.01% for three years):

The Information Ratio evaluates how well your investment uses available information. A positive Information Ratio indicates effective use of data. The ratios of -0.02% for one year and 0.01% for three years suggest that the investment’s decision-making with available information has been modestly effective.

• R/R Ratio (0.14% for 1 year and 0.06% for three years):

The R/R Ratio evaluates the rewards (returns) compared to the risks taken. Positive values mean the rewards justify the risks. These ratios of 0.14% for one year and 0.06% for three years indicate that the investment has provided some tips relative to the risks, with a slightly better performance in the short term.

• Alpha (0.02% for 1 year and 0.03% for three years):

Think of Alpha as the skill of your driver. A positive Alpha means your investment outperforms the average driver on the same route. Alphas of 0.02% for one year and 0.03% for three years suggest that the investment has demonstrated some skill in outperforming its benchmark.

• Beta (0.78% for 1 year and 0.83% for three years):

Beta is like the responsiveness of your driver to road conditions. A Beta greater than 1 means your driver responds more than the average driver to changes in the road (market). Betas of 0.78% for one year and 0.83% for three years indicate that the investment has shown moderate responsiveness to market changes.

• Bear Beta (0.95% for 1 year and 1.02% for three years):

Bear Beta measures the responsiveness during bearish (adverse) market conditions. A Bear Beta more significant than 1 suggests heightened responsiveness in downturns. These Bear Betas of 0.95% for one year and 1.02% for three years indicate that the investment has demonstrated increased responsiveness during bearish markets.

• Bull Beta (0.74% for 1 year and 0.73% for three years):

Bull Beta measures responsiveness during bullish (optimistic) market conditions. A Bull Beta more significant than 1 suggests increased responsiveness in upswings. These Bull Betas of 0.74% for one year and 0.73% for three years indicate that the investment has shown some increased responsiveness during bullish markets.

• R-square (0.88% for 1 year and 0.84% for three years):

R-square measures how much external factors influence your investment’s movement. Higher R-square values mean more significant influence from external aspects. R-squares of 0.88% for one year and 0.84% for three years suggest that external factors moderately influence the investment’s performance.

• Adjusted R-square (0.86% for 1 year and 0.83% for three years):

Adjusted R-square is a refined measure of external influence. Values closer to 1 indicate a more substantial external impact. Adjusted R-squares of 0.86% for one year and 0.83% for three years reflect moderate external influence on the investment.

• Value at Risk Normal (-8.59% for 1 year and -7.13% for three years):

Value at Risk Normal estimates the worst-case scenario. Negative values indicate potential losses. These values of -8.59% for one year and -7.13% for three years suggest potential worst-case losses of that magnitude.

• Value at Risk Normal ETL (-10.98% for 1 year and -9.02% for three years):

Value at Risk Normal ETL estimates the extreme tail losses. Negative values imply severe potential losses. These values of -10.98% for one year and -9.02% for three years suggest the potential for severe losses in extreme scenarios.

• Value at Risk Quantile (-10.26% for 1 year and -10.3% for three years):

Value at Risk Quantile estimates potential losses at a specific percentile. Negative values indicate potential losses at that percentile. These values of -10.26% for one year and -10.3% for three years suggest potential losses at those specific percentiles.

• Standard Deviation (19.79% for 1 year and 15.62% for three years):

Standard Deviation measures the bumpiness of your ride. Higher values mean a bumpier ride (greater volatility). Standard Deviations of 19.79% for one year and 15.62% for three years suggest a relatively bumpy investment ride.

• Covariance (33.64% for 1 year and 20.11% for three years):

Covariance measures how two variables, in this case, your investment’s and the market’s returns, move together. Higher values imply stronger co-movement. Covariances of 33.64% for one year and 20.11% for three years suggest significant co-movement with the market.

• Variance (32.64% for 1 year and 20.32% for three years):

Variance is a measure of how much your investment’s returns vary. Higher values mean more significant variability. Variances of 32.64% for one year and 20.32% for three years indicate significant return variability.

• Correlation (0.94% for 1 year and 0.91% for three years):

Correlation is like how synchronized your car’s movement is with others on the road. Values closer to 1 mean high synchronization. Correlations of 0.94% for one year and 0.91% for three years suggest relatively low synchronization with other market movements.

• Downside Deviation Population (1.61% for 1 year and 1.39% for three years):

Downside Deviation Population measures the volatility of negative returns. Higher values indicate greater volatility in negative performance. Downside Deviations of 1.61% for one year and 1.39% for three years suggest moderate volatility in negative returns.

• Semi-Deviation (7.28% for 1 year and 4.88% for three years):

Semi-deviation measures the volatility of returns below a certain threshold. Higher values indicate greater volatility below that threshold. Semi-deviations of 7.28% for one year and 4.88% for three years suggest significant fluctuations in returns below the threshold.

• Semi-Variance (52.98% for 1 year and 23.83% for three years):

Semi-Variance is a measure of the variability of returns below a certain threshold. Higher values imply more significant variability below that threshold. Semi-Variances of 52.98% for one year and 23.83% for three years indicate significant return variability below the threshold.

Is iShares MSCI EM Islamic UCITS ETF (ISDE) regulated?

Yes, through being listed on the London Stock Exchange.

Conclusion

The iShares MSCI World Islamic UCITS ETF (ISDE) analysis indicates favourable values for

• Sharpe ratio
• Sortinio
• Treynor ratio
• Alpha
• R/R Ratio
• Bull Beta
• R-Square
• Adjusted R2
• Correlation
• Downside Deviation Population
• Semi Deviation
• Semi Variance

In addition, ISDE scores well on its ESG rating at 69 and Lipper ratings of 3 for Consistent Return and Expense.

Investors should also be aware of the following unfavourable quantitative analysis results:

• Tracking error
• Information ratio
• Beta
• Bear beta
• Standard Deviation
• CoVariance
• Variance
• Value at risk
• Value at risk Normal ETL
• Value at risk quantile

In conclusion, while ISDE shows strengths in various performance metrics and ratings, potential investors must consider its positive and negative aspects carefully. It is crucial to conduct thorough due diligence, understand the market, sector and business exposures underlying the index, evaluate risk tolerance, and align investment objectives. Seeking advice from a qualified financial advisor is recommended to make well-informed decisions tailored to individual circumstances.

iShares MSCI USA Islamic – ISUS