IShares MSCI USA Islamic ETF (ISUS)
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Brief information: iShares MSCI USA Islamic UCITS ETF is an exchange-traded fund incorporated in Ireland. The Fund aims to track the performance of the MSCI USA Islamic Index. The MSCI USA Islamic Index offers exposure to stocks from the MSCI USA Index which comply with Shariah investment principles. Settlement: ICSD.
Introduction to ISHARES MSCI USA ISLAMIC
The iShares MSCI USA Islamic ETF serves as a unique investment vehicle, combining the growth potential of the U.S. stock market with the ethical and religious principles of Islamic finance.
Managed by BlackRock, a global giant in the asset management industry, this specialized ETF is designed for investors who want to navigate the complexities of the financial markets without compromising their religious beliefs.
As a member of BlackRock’s acclaimed iShares family of ETFs, it comes with the backing of a well-established institution that has vast experience in managing diverse funds to cater to various investment needs.
The fund aims to provide a seamless avenue for achieving Shariah-compliant exposure to American equities. It does so by closely tracking the performance of the MSCI USA Islamic Index, a benchmark that meticulously screens companies for compliance with Islamic law.
By focusing on financial ratios and scrutinizing business activities, the index ensures that it excludes entities engaged in industries that Islamic law prohibits, such as alcohol, tobacco, and gambling, among others.
Thus, the fund offers a diversified yet compliant investment opportunity that aligns financial growth with religious principles.
Investing in the iShares MSCI USA Islamic ETF is not just an act of faith but also a strategic financial decision. The fund’s structure allows individuals to access a broad swath of the U.S. equity market, which has historically shown resilience and growth over the long term.
By offering a diversified portfolio that adheres to Islamic principles, the fund makes it easier for investors to maintain a balanced and ethical investment approach.
This is especially beneficial for those who, until now, might have found it challenging to participate in broader market opportunities due to ethical or religious restrictions.
What are you investing in?
When you choose to invest in the iShares MSCI USA Islamic, you are opting for an exchange-traded fund (ETF) that not only provides exposure to the dynamic U.S. equity market but does so in a manner that adheres to Islamic principles.
iShares, the brand behind this ETF, is a renowned subsidiary of BlackRock, which ranks among the world’s most significant asset management companies. Their expertise and global presence ensure a structured approach to investments, always keeping in line with the ever-evolving financial landscape.
Central to Islamic finance are the principles rooted in Islamic law, commonly referred to as Shariah. These principles mandate the avoidance of investments in particular industries considered non-compliant, such as alcohol, tobacco, gambling, and conventional financial services that involve interest (riba).
The iShares MSCI USA Islamic ETF has been designed meticulously, ensuring it adheres to these principles. It achieves this by carefully screening and selecting companies for inclusion, ensuring they operate consistently with Shariah guidelines.
The primary objective of the iShares MSCI USA Islamic ETF is to mirror the performance of the MSCI USA Islamic Index. This index aggregates U.S. companies that have undergone rigorous screening to ensure their compliance with Islamic tenets.
By utilizing a composite of financial ratios, the index assesses the business undertakings of companies, effectively excluding those involved in non-compliant industries. This means that when you invest in this ETF, you are putting your money into a pool of U.S. stocks vetted for their alignment with Islamic principles.
This offers a harmonious blend of ethical investing while seeking financial growth.
How do you grow your money by investing in iShares MSCI USA Islamic ?
The fund’s primary goal is to emulate the performance of the MSCI USA Islamic Index meticulously.
This benchmark is an amalgamation of U.S. corporations that have successfully navigated through a stringent compliance screening process rooted in Islamic precepts.
By integrating a composite of relevant financial ratios, the index effectively filters out entities entrenched in non-compliant industries, thereby ensuring that your investment is channeled into a pool of U.S. stocks that are meticulously vetted for alignment with Islamic principles.
This meticulous process culminates in a synergy of ethical investing and financial growth pursuit.
Top 10 Holdings |
Weight %Â |
---|---|
Microsoft |
22.88 |
Tesla |
7.35 |
Exxon Mobil Corporotion |
4.19 |
Johnson & Johnson |
4.19 |
Protecer& Gamble |
3.55 |
Chevron |
2.84 |
Merck |
2.61 |
Adobe |
2.42 |
Salesforce |
2.17 |
Cisco systems |
2.06 |
Lipper Leader Rating
Overall | 3 Years | 5 Year | 10 year | |
Total Return | 4(1017 funds) | 5 (1017 funds) | 4 (842 funds) | 3 (474 funds) |
Consistent Return | 4 (1017 funds) | 5 (1017 funds) | 3 (842 funds) | 3 (474 funds) |
Preservation | 5 (10154 funds) | 5 (10154 funds) | 4 (8122 funds) | 5 (4389 funds) |
Expense | 5 (985funds) | 5 (985 funds) | 5 (821 funds) | 5 (460 funds) |
What makes iShares MSCI USA Islamic (ISUS) Shariah Compliant?
Ensuring Shariah compliance of the iShares MSCI USA Islamic investment involves a rigorous, multifaceted screening process firmly anchored in Shariah principles. While the specific methodologies applied may vary, there are several universal criteria that underpin a Shariah-compliant investment:
- Avoidance of Prohibited Activities: Shariah-compliant funds meticulously avoid investing in businesses engaged in activities deemed forbidden by Islamic principles. These typically encompass industries related to alcohol, tobacco, gambling, pork products, and interest-based financial services (riba), along with others considered harmful to society or the environment.
- Limitation on Debt and Interest: Shariah-compliant investments strategically avoid companies burdened by excessive debt or those engaged in interest-based lending and transactions. The foundational principles of Islamic finance discourage interest-based transactions (riba), promoting instead risk-sharing and equity-based arrangements.
- Financial Ratios and Screening: A suite of financial ratios and sophisticated screening methodologies are utilized to evaluate companies’ compliance levels. The screening considers the revenue or assets generated from non-compliant activities; companies with substantial engagement in prohibited activities are consequently excluded from Shariah-compliant investments.
- Oversight by Independent Boards: Investments seeking Shariah compliance are often subject to the scrutiny and oversight of independent Shariah advisory boards or scholars. These expert bodies are tasked with reviewing and ensuring that the investment holdings, operational practices, and compliance mechanisms of the investment product are in strict adherence to Islamic principles.
- Commitment to Transparency and Auditing: Investments compliant with Shariah principles prioritize transparency and accountability. The practice of regular audits and diligent reporting ensures that the investment’s holdings and operations continuously align with and meet the predetermined Shariah guidelines, maintaining the integrity and compliance of the investment product over time.
ESG Rating of ISHARES MSCI USA ISLAMIC
ESG Overall Score: 77.22 |
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Environmental Score: 73.46 |
Social Score: 79.09 |
Governance Score: 75.93 |
Controversies score: 51.87 |
The iShares MSCI USA Islamic ETF boasts an overall ESG score of 77.22, depicting a commendable commitment to environmental, social, and governance (ESG) criteria in its investment approach. The fund’s breakdown is as follows:
- Environmental Score: 73.46
With a score of 73.46, it signals a proactive stance on environmental stewardship, reflecting investments in companies that champion sustainability, responsible resource use, and other environmentally-conscious practices. - Social Score: 79.09
This high score represents the fund’s emphasis on social factors, investing in companies that demonstrate commitment to workforce welfare, community engagement, diversity, and inclusion. - Governance Score: 75.93
A governance score of 75.93 suggests investments in companies showcasing strong corporate governance, including effective board structures, executive compensation fairness, and transparent financial reporting.
However, it’s crucial to note the Controversies Score of 51.87, hinting at past involvements in controversies or incidents related to ESG matters. Prospective investors should delve deeper into these issues to understand their impact on the fund’s reputation and overall performance. Despite this, the fund’s ESG scores overall paint a picture of a product that is significantly attuned to ESG considerations.
Analysis of ISHARES MSCI USA ISLAMIC
When considering an investment in the iShares MSCI USA Islamic fund, understanding some key metrics can help you make an informed decision. Below is a straightforward breakdown of these measures:
Analysis | Over a 1-Year Period | Over a 3-Year Period |
Sharpe ratio | 0.17 | 0.21 |
Sortinio ratio | 0.14 | 0.19 |
Treynor ratio | 0.98 | 1.15 |
Tracking error | 1.31 | 1.34 |
Information ratio | 0.27 | 0.1 |
Risk Return Ratio | 0.25 | 0.36 |
Alpha | 0.33 | 0.19 |
Beta | 1.05 | 0.93 |
Bear Beta | 0.97 | 0.9 |
Bull Beta | 1.36 | 0.89 |
R2 | 0.95 | 0.93 |
Adjusted R 2 | 0.94 | 0.93 |
Value at Risk normal | -5.63 | -4.66 |
Value at Risk normal ETL | -7.31 | -6.18 |
Value at Risk Quantile | -6.94 | -6.05 |
Statistical Analysis | Over 1 Year | Over three years |
Standard Deviation | 13.94 | 12.61 |
CoVariance | 28.73 | 24.36 |
Variance | 16.2 | 13.25 |
Correlation | 0.98 | 0.97 |
Downside Deviation Population | 0.57 | 0.81 |
Semi Deviation | 5.09 | 4.02 |
Semi Variance | 25.88 | 16.17 |
Performance Over 1 and 3 Years:
- Sharpe ratio (0.17 for 1 year, 0.21 for 3 years):
- Think of this as evaluating the smoothness of your drive. A higher Sharpe ratio means a smoother drive with fewer stops and starts. In the case of the fund, a low Sharpe ratio indicates that it didn’t offer a significantly smooth ‘ride’ (or returns) considering the ‘traffic’ (or risks) it encountered.
- Sortino ratio (0.14 for 1 year, 0.19 for 3 years):
- This is similar to Sharpe but focuses on severe traffic jams only. Again, these low values mean the route (fund) hasn’t been as smooth as we might hope, specifically when the traffic is bad.
- Treynor ratio (0.98 for 1 year, 1.15 for 3 years):
- Think of Treynor as evaluating the scenic views on your drive. The fund has decent ‘views,’ offering some attractive returns for the risks taken.
Error and Information
- Tracking error (1.31 for 1 year, 1.34 for 3 years):
- Like GPS errors that sometimes misguide, tracking error shows how much the fund deviated from its planned ‘route’ or benchmark. Moderate errors here mean it mostly followed the expected path but had some deviations.
- Information ratio (0.27 for 1 year, 0.1 for 3 years):
- Think of this as feedback on road signs clarity. The low ratio suggests the ‘signs’ (or returns over benchmark) weren’t very clear or helpful in navigating the investing journey.
Risk & Returns
- Risk Return Ratio (0.25 for 1 year, 0.36 for 3 years):
- This evaluates the ‘fuel efficiency’ of your car on each route. Here, the fund didn’t offer high efficiency considering the risks.
Performance Indicators
- Alpha (0.33 for 1 year, 0.19 for 3 years):
- Alpha is like reaching earlier than expected. Positive values mean the fund performed better than predicted, but the extra minutes saved are minimal.
- Beta (1.05 for 1 year, 0.93 for 3 years):
- Beta indicates how the route reacts to traffic. A Beta close to 1 means it generally reacts similarly to the overall ‘traffic’ in the market.
Bear & Bull Beta
- Bear Beta (0.97 for 1 year, 0.9 for 3 years):
- This is the performance when traffic is bad. Lower values mean the fund might navigate slightly better in rough market conditions.
- Bull Beta (1.36 for 1 year, 0.89 for 3 years):
- This is the performance when roads are clear. The fund is likely to do particularly well when market conditions are favorable.
Performance Consistency
- R-Squared (R2) (0.95 for 1 year, 0.93 for 3 years):
- R2 is like having a GPS that closely guides you to your destination. A high R2, like 0.95 or 0.93, means your car’s GPS (the fund) closely follows the recommended path (the benchmark).
- Adjusted R-squared (0.94 for 1 year, 0.93 for 3 years):
- This is R2 with consideration for pit stops or detours. Even with these, the fund stays closely aligned with the benchmark, just like your GPS rerouting you efficiently.
Potential Losses
- Value at Risk (VaR) normal (-5.63 for 1 year, -4.66 for 3 years):
- Imagine you’re risking running out of fuel. VaR normal is the worst amount of fuel you could lose on 95% of your trips. With -5.63% for one year and -4.66% for three years, it means there’s a small risk of running very low on fuel.
- Value at Risk normal ETL (-7.31 for 1 year, -6.18 for 3 years):
- If you do run out of fuel, VaR normal ETL represents how far you might be from a fuel station on average. It provides the average amount you could lose in very rare and extremely bad situations.
- Value at Risk Quantile (-6.94 for 1 year, -6.05 for 3 years):
- This is like knowing the worst amount of fuel you might lose on the riskiest roads. It’s the maximum loss expected at a certain confidence level.
Variability Measures
- Standard Deviation (13.94 for 1 year, 12.61 for 3 years):
- Think of it like the variation in your driving speed. A higher number means you speed up and slow down more frequently, which in investment, reflects higher unpredictability in returns.
- CoVariance (28.73 for 1 year, 24.36 for 3 years):
- CoVariance is like observing how your car behaves when you accelerate: does it smoothly gain speed (positive covariance) or does it struggle (negative covariance)? It indicates how the fund moves compared to another asset or benchmark.
- Variance (16.2 for 1 year, 13.25 for 3 years):
- This measures the variability in your car’s speed; higher variance means your speed is more unpredictable. For the fund, it suggests a greater range of returns, signifying more risk.
- Correlation (0.98 for 1 year, 0.97 for 3 years)::
- This is like the relationship between pressing the gas pedal and the car accelerating. A correlation close to 1 means that the fund’s returns closely follow its benchmark or another asset.
Downside Measures
- Downside Deviation Population (0.57 for 1 year, 0.81 for 3 years):
- This is like the extent of slowing down when you hit traffic. Lower values indicate that the fund doesn’t decrease in value too drastically compared to other funds in bad market conditions.
- Semi Deviation (5.09 for 1 year, 4.02 for 3 years):
- This is measuring the roughness of the road but only focusing on the particularly bumpy parts. It tells us about the fund’s worst returns without considering the better-than-average ones.
- Semi Variance (25.88 for 1 year, 16.17 for 3 years):
- Semi Variance is like looking at how often and how severely you have to brake hard. It looks at how bad the fund’s ‘bumpy parts’ or negative returns are.
Is it regulated?
The iShares MSCI USA Islamic ETF is listed on the London Stock Exchange, ensuring it operates under stringent regulatory oversight and providing additional security for potential investors.
Conclusion
The iShares MSCI USA Islamic ETF presents a unique investment vehicle for individuals looking to navigate the U.S. equity market while strictly adhering to Islamic principles. Managed by the globally recognized asset manager, BlackRock, the fund offers a careful selection of Shariah-compliant stocks, providing a blend of ethical and financial considerations for investors.
With its underlying assets encapsulating a variety of sectors, the fund exhibits a diverse portfolio designed for moderate risk-adjusted performance. Its holdings, including notable companies like Microsoft, Tesla, and Exxon Mobil Corporation, have been meticulously screened to align with Shariah law, thereby providing investors with a sense of religious and ethical assurance in their investments.
Investors contemplating a position in this fund should take note of its ESG rating, which highlights the ETF’s commitment to environmental, social, and governance considerations despite a controversial score that warrants further investigation.
The ETF’s financial performance and risk metrics, including Sharpe ratio, alpha, and beta, provide insights into its risk-return profile, suggesting moderate returns in light of the associated risks.
For individuals concerned about downside risks, the fund’s VaR and downside deviation metrics offer valuable perspectives.
Before deciding, investors should weigh the fund’s overall risk and return profile against their investment objectives, risk tolerance, and time horizon.
The fund is ideally suited for individuals seeking exposure to a Shariah-compliant portfolio of U.S. equities with a moderate risk tolerance and a long-term investment perspective.
Its unique combination of ethical investing and diversified holdings makes it an attractive option for those wishing to invest responsibly while adhering to Islamic principles.
Ultimately, potential investors should engage in further research and possibly consult with a financial advisor to determine if the iShares MSCI USA Islamic ETF aligns with their overall investment strategy and financial goals.
This fund is not only an investment vehicle but also a reflection of the commitment to ethical considerations and Islamic values in the financial domain, serving as a bridge between faith-based investing and the dynamic landscape of the U.S. equity market.
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