Saturna Al-Kawthar Investment

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Brief information: Saturna Al-Kawthar Global Focused Equity UCITS ETF is an Irish ETF issue by HANetf. The Fund aims to achieve capital growth over the medium to long term, whilst complying with the principles of Shariah Investment, and will invest in a concentrated, actively-managed portfolio of approximately 20-35 global equities and equity-related securities with a high-quality bias. Settlement: ICSD.

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Introduction to Saturna Al-Kawthar Global Equity UCITS ETF (AMAL)

The AMAL ETF is an Islamic investment product managed by Saturna Capital. It offers global equity exposure while adhering to Islamic principles. It follows a diversified portfolio strategy focusing on companies with solid financials and positive ESG characteristics. AMAL provides liquidity and transparency as an exchange-traded fund, making it a convenient investment option for those seeking alignment with Islamic values.

What are you investing in?

The Saturna Al-Kawthar Global Focused Equity UCITS ETF (AMAL) is an actively managed global equity ETF focusing on Shariah-compliant stocks with positive ESG characteristics. The fund aims to achieve long-term capital appreciation. It exhibits the primary features of Islamic financial products: it is asset-backed, ethical, shares risks equitably and is subject to good governance. The ETF typically invests in 30-45 stocks of high quality, attractively priced global companies that are best-in-class on various ESG, financial and valuation metrics and have solid growth prospects. The Shariah ETF invests globally and is benchmark agnostic regarding geographic and industry allocations. It is managed by Saturna Capital Corporation a $6 billion asset management firm with over 31 years’ experience managing Islamic and socially responsible investment strategies.

Top 10 Holdings	% of TNA
Taiwan Semiconductor	2.96
Alphabet Inc	2.92
Canadian Pacific Kansas	2.91
ASML Holdings	2.87
Accenture PLC	2.78
Microsoft Corp	2.74
Apple Inc	2.67
Corteva Inc	2.66
Cisco Systems	2.63
Texas Instruments Inc	2.61

How do you grow your money by investing in Saturna Al-Kawthar Global Equity UCITS ETF (AMAL)?

The primary objective of the Saturna Al-Kawthar Global Focused Equity UCITS ETF (AMAL) is to achieve long-term capital appreciation for investors. The fund aims to grow your money by investing in a carefully selected portfolio of global stocks that are both Shariah-compliant and demonstrate positive environmental, social, and governance (ESG) characteristics.

As the companies within the AMAL ETF’s portfolio grow and generate profits, the value of the fund’s investments may increase. This can potentially lead to capital appreciation and higher returns for investors. The fund’s investment strategy focuses on identifying high-quality companies that are attractively priced, have strong financial and valuation metrics, and show solid growth prospects. By investing in such companies, the AMAL ETF aims to benefit from their growth potential and generate favorable investment returns over the long term.

What makes Shariah Compliant?

The Fund will not invest in securities of companies that are directly active in, or derive more than 5% of their revenues from such business activities as 

• Alcohol,
• Tobacco, 
• Pork-related products,
• Conventional financial services,
• Defence or weapons, 
• Gambling,
• Music, hotels,
• Cinema or adult entertainment (Prohibited Activities); 

The Fund shall only invest in the securities of companies which comply to the following financial ratios: 

• The total amount of interest-bearing debt does not exceed 30% of the market capitalisation of the company; 
• The total amount of interest-bearing securities does not exceed 30% of the market capitalisation of the company;
•  The total revenue from Prohibited Activities does not exceed 5% of the company’s total revenues

The Fund may not be geared or leveraged through investment in any security

(Reference) 

ESG rating of Saturna Al Kawthar Global Focused UCITS ETF (AMAL)

ESG Overall Score: 76
Environmental Score: 71	Social Score: 81	Governance Score: 73
Controversies score: 59

Based on the given scores it appears that the fund has a ESG profile. A score of 76, for the ESG indicates that the fund gives consideration to environmental, social and governance factors when making investment decisions.

The environmental score of 71 means that the fund takes into account aspects like climate change, resource usage and overall environmental impact. With a score of 81 it suggests that the fund considers factors such as labor practices, human rights and community relations in its investments.

In terms of governance, the funds score is 73, which implies that it considers factors like board structure, executive compensation and shareholder rights. The controversies score of 59 suggests that there may have been some controversies or issues associated with the funds investments; however specific details about these controversies are not provided.

Overall while Saturna Al Kawthar Global Focused UCITS ETF (AMAL) shows ESG scores based on these findings further research or referring to official documentation is important for a more comprehensive analysis of both their specific ESG approach and the companies, in their portfolio.

Analysis of Satruna Al Kawthar Global Focused UCITS ETF (AMAL)

The following analysis provides an in-depth examination of AMAL’s performance over six-month and one-year periods, covering key metrics such as Sharpe, Sortino, Treynor, Tracking, Information, Risk- Return Ratio, Alpha, Beta, Bear Beta, Bull Beta, R-Square, Adjusted R2, Value at Risk (VaR), VaR Normal ETL, VaR Quantile.

Analysis	Over a Six Month Period	Over a 1 Year Period
Sharpe Ratio	0.08	0.11
Sortino Ratio	0.08	0.1
Treynor Ratio	0.07	0.62
Tracking Error	0.28	1.37
Information Ratio	-0.02	-0.12
Risk Return Ratio	0.11	0.2
Alpha	-0	-0.11
Beta	0.93	0.93
Bear Beta	0.96	0.81
Bull Beta	0.96	0.82
R2	0.85	0.94
Adjusted R2	0.85	0.92
Value at Risk Normal	-1.1	-7.54
Value at Risk Normal ETL	-1.4	-9.73
Value at Risk Quantile	-1.28	-8.01

 

Statistical Analysis	Over 6 month	Over 1-year
Relative average Return	-0	-0.18
Average Return	0.08	1.06
Average Loss	-0.24	-1.74
Max gain	1.82	7.6
Max Loss	-1.68	-8.01
Maximum Drawdown	-5.34	-12.94

• Sharpe Ratio Conclusion of AMAL:

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.

For AMAL, the low Sharpe ratio (0.08% and 0.11% ) indicates that the fund has a lower risk-adjusted performance, thus lower returns per unit of risk.

• Sortino Ratio Conclusion of AMAL:

This is another way of looking at “risk vs. reward,” but it only looks at the downside, or negative risk, relative to the risk-free rate of return. In this case, the low Sortino Ratio of SPUS (0.08% / 0.1%) means that it is not doing as well in terms of generating returns when only considering the downside risk.

• Treynor Ratio Conclusion of AMAL:

Think of this as another “bang for your buck” measure but taking into account how the market is doing. Higher numbers are better, showing you’re getting a good return for the market risk you’re taking.

The Treynor ratio is calculated by dividing the average excess return of an investment by its beta, which represents the systematic risk. The Treynor ratio values of AMAL are 0.07% for six months and 0.62% for one year. This indicates that the Satruna Al Kawthar Global Focused UCITS ETF (AMAL) fund has generated favourable risk-adjusted returns considering its systematic risk.

• Tracking Error Conclusion of AMAL:

This tells us how well AMAL is mimicking its benchmark. A lower number is good here, as it means AMAL is doing a good job of tracking its benchmark.

In this case, the tracking error of AMAL is 0.28% for six months and 1.37% for one year. The fund’s performance has varied from its benchmark index. This could be attributed to factors such as active management decisions, asset allocation, or security selection.

• Information Ratio Conclusion of AMAL:

The case of the Saturna Al-Kawthar Global Focused UCITS ETF (AMAL). Over six months, AMAL has an Information Ratio of -0.02%, over one year, it has an Information Ratio of -0.12. These negative values indicate that AMAL has underperformed its benchmark during both periods and has not been able to generate additional returns that compensate for the extra risk it takes.

The negative Information Ratio for AMAL suggests that it has been unable to deliver better returns than its benchmark, even though it has taken on additional risk. This means that, from a risk-adjusted perspective, the fund has yet to successfully generate excess returns.

• Risk Return Ratio Conclusion of AMAL:

The Risk-Return Ratio, also known as the Reward-to-Volatility Ratio, measures the relationship between the potential return and the level of risk associated with an investment.

For the Saturna Al-Kawthar Global Focused UCITS ETF (AMAL), the Risk-Return Ratio is 0.11% over six months and 0.2% over one year. These values suggest that, for the given periods, the potential return of AMAL is relatively low compared to the level of risk involved.

The Risk-Return Ratio indicates that, on average, AMAL has provided lower returns concerning the risk taken. The fund may not have effectively rewarded investors for the amount of risk they assumed.

• Alpha conclusion of AMAL:

Alpha is like your “extra credit” in school. If the benchmark index (against which AMAL is compared) increases by 5%, and AMAL generates a return of 6%, the additional 1% is the Alpha. An Alpha of -0% over six months and -0.11% over one year for AMAL means that the investment has not outperformed its benchmark during those periods.

The negative Alpha suggests that AMAL has yet to achieve returns above what would be expected based on its benchmark index. It indicates that the investment performance has aligned with or slightly below the benchmark’s performance.

• Beta conclusion of AMAL:

The Beta measures an investment’s sensitivity to movements in the broader market or benchmark. A Beta of 1 indicates that the investment tends to move in line with the market, while a Beta more significant than 1 suggests the investment is more volatile than the market. A Beta less than 1 indicates lower volatility compared to the market.

For the investment you mentioned AMAL, the Beta values are 0.93% over six months and one year. This indicates that the investment has a moderate level of market sensitivity, as its movements are expected to track the benchmark or market closely.

A Beta of 0.93% suggests that the investment’s price tends to move around 93% as much as the broader market or benchmark. It implies a close correlation between the investment’s performance and the overall market movements.

• Bear Beta conclusion of AMAL:

Based on the information provided, AMAL has a Bear Beta of 0.96% over six months and 0.81% over a one-year period. These values indicate that AMAL has exhibited a lower sensitivity to downward market movements than the broader market or benchmark during bearish conditions.

Bear Beta of 0.96% (six months) and 0.81% (one year) for AMAL suggests that the investment has the potential to experience smaller declines than the market during bearish periods. It indicates that AMAL may provide some degree of downside protection or relatively better performance when the market experiences downturns.

• Bull Beta conclusion of AMAL:

Bull Beta measures an investment’s sensitivity to upward movements in the market or benchmark during bullish or rising market conditions. A Bull Beta value greater than 1 suggests that the investment has the potential to outperform the market during such periods.

Bull Beta of 0.96% (six months) and 0.82% (one year) for AMAL suggests that the investment has the potential to experience gains that are slightly lower than the market during bullish periods. It implies that AMAL may not capture the full extent of market upside but still has the potential to perform well when the market is rising.

• R-Square Conclusion of AMAL:

An R-squared close to 1 means that most of AMAL’s performance can be explained by its benchmark’s performance. It is useful to know if you are considering investing in AMAL or just sticking with a fund that tracks its benchmark.

An R2 of 0.85% (six months) and 0.94% (one year) for AMAL indicates that approximately 85% and 94% of the variability in AMAL’s returns can be attributed to the movements in its benchmark or market index, respectively. This suggests a relatively strong correlation between AMAL’s performance and the performance of its benchmark or market index.

• Adjusted R2 Conclusion of AMAL:

Adjusted R2, is a statistical measure that takes into account the number of predictors or independent variables in a regression model. It adjusts the R-squared value by penalizing the inclusion of irrelevant or redundant variables in the model.

Adjusted R2 of 0.85% (six months) and 0.92% (one year) for AMAL indicates that approximately 85% and 92% of the variability in AMAL’s returns can be attributed to the movements in its benchmark or market index, respectively, while accounting for the number of predictors or independent variables in the model.

• Value at Risk Normal Conclusion of AMAL:

Value, at Risk (VaR) is a tool utilized to approximate the loss that an investment or portfolio could encounter within a specific timeframe, based on a predetermined level of confidence. It gives an estimation of the loss, in typical market situations.

VaR Normal of -1.1% (six months) and -7.54% (one year) for AMAL indicates that there is a certain level of confidence that the maximum potential loss for AMAL’s returns under normal market conditions would be within those percentages over the specified time periods.

• Value at Risk Normal ETL Conclusion for AMAL:

Value at Risk Normal Expected Tail Loss (VaR ETL) is a risk measurement tool that estimates the average tail loss beyond normal based on historical returns, assuming an asymmetric normal distribution. With AMAL, the VaR ETL values are -1.14% over six months and -9.78% over a one-year period. 

The effect of a negative VaR ETL value, as indicated by AMAL, illustrates the potential average tail loss beyond normal that the investment portfolio may experience.

• Value at Risk Quantile Conclusion for AMAL:

In conclusion, the Value at Risk (VaR) Quantile is a method of estimating VaR by ordering the historical return series from lowest to highest. It measures the potential maximum loss of an investment portfolio at a specified confidence level. In this case, the VaR Quantile values are -1.28% for one year and -8.01% for three years.

The effect of a negative VaR Quantile value implies the potential estimated maximum loss that the portfolio may experience at the specified confidence level, based on historical return data.

• Relative Average Return Conclusion for AMAL:

Based on the information provided, the relative average return for the Saturna Al-Kawthar Global Focused Equity UCITS ETF (AMAL) over a six-month period is 0% and over a one-year period is -0.18%.

A relative average return of 0% over six months indicates that the fund’s performance during that period was flat, with no significant positive or negative returns on average. Similarly, a relative average return of -0.18% over one year suggests a slight negative return over that period.

• Relative Average Return Conclusion for AMAL:

The average return for the Saturna Al-Kawthar Global Focused Equity UCITS ETF (AMAL) is 0.08% over a six-month period and 1.06% over a one-year period.

A six-month average return of 0.08% suggests a small positive return over that time frame, indicating a slight growth in the fund’s value on average. Similarly, a one-year average return of 1.06% indicates a slightly higher positive return over the course of a year.

• Average Loss Conclusion for AMAL:

The average loss for the Saturna Al-Kawthar Global Focused Equity UCITS ETF (AMAL) is -0.24% over a six-month period and -1.74% over a one-year period.

A six-month average loss of -0.24% indicates a slight negative return over that time frame, suggesting a small decrease in the fund’s value on average. Similarly, a one-year average loss of -1.74% indicates a larger negative return over the course of a year.

• Max Gain Conclusion for AMAL:

The maximum gain for the Saturna Al-Kawthar Global Focused Equity UCITS ETF (AMAL) is 1.82% over a six-month period and 7.6% over a one-year period.

A six-month maximum gain of 1.82% indicates the highest positive return achieved during that time frame. Similarly, a one-year maximum gain of 7.6% suggests the highest positive return achieved over the course of a year.

• Max Loss Conclusion for AMAL:

The maximum loss for the Saturna Al-Kawthar Global Focused Equity UCITS ETF (AMAL) is -1.68% over a six-month period and -8.01% over a one-year period.

A six-month maximum loss of -1.68% indicates the largest negative return experienced during that time frame. Similarly, a one-year maximum loss of -8.01% suggests the largest negative return experienced over the course of a year.

• Maximum Drawdown Conclusion for AMAL:

The maximum drawdown for the Saturna Al-Kawthar Global Focused Equity UCITS ETF (AMAL) is -5.34% over a six-month period and -12.94% over a one-year period.

A six-month maximum drawdown of -5.34% represents the largest percentage decline in the fund’s value from a previous peak to the lowest point during that six-month period. Similarly, a one-year maximum drawdown of -12.94% indicates the largest percentage decline in the fund’s value over the course of a year.

Is AMAL regulated?

Yes, AMAL is regulated by being listed on the London Stock Exchange. 

Conclusion

In conclusion, the Saturna Al-Kawthar Global Equity UCITS ETF (AMAL) is an Islamic investment product that aims to provide global equity exposure while adhering to Shariah principles and positive ESG characteristics. The fund focuses on a diversified portfolio of high-quality, attractively priced global companies with solid growth prospects. By investing in AMAL, investors have the potential to benefit from long-term capital appreciation.

AMAL’s Shariah-compliant investment approach ensures that it avoids companies involved in prohibited activities such as alcohol, tobacco, pork-related products, conventional financial services, defense or weapons, gambling, music, hotels, cinema, or adult entertainment. The fund also adheres to specific financial ratios, including limits on interest-bearing debt and securities and revenue from prohibited activities.

With respect to ESG considerations, AMAL has an ESG overall score of 76, indicating that it takes into account environmental, social, and governance factors when making investment decisions. The fund’s environmental score of 71 suggests a focus on climate change and resource usage, while its social score of 81 indicates consideration of labor practices and human rights. The governance score of 73 reflects attention to factors such as board structure and shareholder rights.

In terms of performance, the analysis of AMAL’s key metrics over six months and one year provides insights into risk-adjusted returns. While the fund’s Sharpe ratio and Sortino ratio indicate lower risk-adjusted performance, the Treynor ratio suggests favorable risk-adjusted returns considering systematic risk. The tracking error suggests some deviation from the benchmark index, and the negative information ratio indicates underperformance compared to the benchmark.

Happy Investing!