Wahed FTSE USA Shariah – HLAL
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Brief information: Wahed FTSE USA Shariah ETF is an exchange-traded fund incorporated in the USA. It seeks to track the total return performance, before fees and expenses, of the FTSE USA Shariah Index. The Index is constructed using an objective, rules-based methodology that begins with an initial universe that mirrors the companies listed in the FTSE USA Index, which is comprised of large and mid-cap US Stocks.
Introduction to Wahed FTSE USA Shariah ETF (HLAL):
HLAL invests in US stocks that meet Shariah standards. These stocks undergo screenings based on business activities and specific financial ratios. For instance, businesses engaged in activities such as traditional finance, alcohol and tobacco production, pork products, non-halal food, gambling, adult entertainment, and weapons are excluded from the index. HLAL focuses on large- and mid-cap stocks.
What are you investing in?
The investment tracks the FTSE Shariah USA Index’s performance, which consists of large- and mid-sized U.S. companies following Shariah requirements. At least 80% of its assets are typically invested in the index’s securities. This fund is non-diversified.
The portfolio favours technology and communication services more than its category average by 16.7 and 3.3 percentage points. Conversely, it is less exposed to financial services and industrials by 13.2 and 4.0 percentage points. The portfolio holds 219 stocks and is as diversified as its counterparts, with the top 10 stocks making up 50.9% of its assets.
What makes Wahed FTSE USA Shariah ETF (HLAL) Shariah Compliant?
The Index is constructed using an objective, rules-based methodology and is comprised of those companies included in the FTSE USA Index that are determined to be Shariah-compliant companies based on their business activities and certain financial ratios, as described below.Â
The Shariah-compliant companies are then weighted in the Index according to their market capitalization. Companies that receive income in excess of 5% of their total revenue from Shariah-prohibited activities are removed from the list of companies eligible for inclusion in the Index. Examples of such activities include:Â
- Conventional finance (non-Islamic banking, finance and insurance, etc.);
- Alcohol production or sale;Â
- Pork-related products and non-halal food production, packaging, and processing or any other activity related to pork and non-halal food;Â
- Casino management, gambling, or adult entertainment;
- Tobacco manufacturing or sale; and
- Weapons, arms, and other defense manufacturing.
Only those companies that pass the following financial ratios will be considered Shariah-compliant:Â
- Debt is less than 33.333% of total assets;Â
- Cash and interest-bearing items are less than 33.333% of total assets;
- Accounts receivable and cash are less than 50% of total assets; andÂ
- Total interest and non-compliant activities income should not exceed 5% of total revenue.
| Top 10 Holdings | Weight %Â |
|---|---|
| Apple | 14.89 |
| Microsoft | 12.73 |
| Alphabet A | 4.02 |
| Tesla | 3.68 |
| Alphabet BÂ | 3.53 |
| Meta Platforms | 3.51 |
| Exxon Mobil Corporation | 2.21 |
| Johnson & Johnson | 2.2 |
| Eli Lilly and Company | 1.97 |
| Protecer& Gamble | 1.86 |
Lipper Leader Rating
| Overall | 3 Years | |
| Total Return |
5 (597 funds) |
5 (597 funds) |
| Consistent Return |
5 (597 funds) |
5 (597 funds) |
| Preservation Return |
4 (12483 funds) |
4 (12483 funds) |
| Tax Efficiency |
5 (596 funds) |
5 (596 funds) |
| Expense |
4 (368 funds) |
4 (368 funds) |
Highest – 5 · 4 · 3 · 2 · 1 – Lowest
How do you grow your money by investing in Wahed FTSE USA Shariah ETF (HLAL)?
Investing in HLAL can offer potential growth through:
- Capital Appreciation: Tracking the FTSE USA Shariah Index, if the stocks in this index grow, HLAL’s value likely increases.
- Dividend Income: Some stocks in HLAL may give dividends, a share of a company’s profit.
What makes Wahed FTSE USA Shariah ETF (HLAL) Shariah Compliant?
The Index is constructed using an objective, rules-based methodology and is comprised of those companies included in the FTSE USA Index that are determined to be Shariah-compliant companies based on their business activities and certain financial ratios, as described below.Â
The Shariah-compliant companies are then weighted in the Index according to their market capitalization. Companies that receive income in excess of 5% of their total revenue from Shariah-prohibited activities are removed from the list of companies eligible for inclusion in the Index. Examples of such activities include:Â
- Conventional finance (non-Islamic banking, finance and insurance, etc.);
- Alcohol production or sale;Â
- Pork-related products and non-halal food production, packaging, and processing or any other activity related to pork and non-halal food;Â
- Casino management, gambling, or adult entertainment;
- Tobacco manufacturing or sale; and
- Weapons, arms, and other defense manufacturing.
Only those companies that pass the following financial ratios will be considered Shariah-compliant:Â
- Debt is less than 33.333% of total assets;Â
- Cash and interest-bearing items are less than 33.333% of total assets;
- Accounts receivable and cash are less than 50% of total assets; andÂ
- Total interest and non-compliant activities income should not exceed 5% of total revenue.
ESG rating of Wahed FTSE USA Shariah ETF (HLAL)
| ESG Overall Score: 76.77 | ||
| Environmental Score:
70.41 |
Social Score:
79.11 |
Governance Score:
77.09 |
| Controversies score: 29.60 | ||
This score measures the Wahed FTSE USA Shariah ETF’s environmental practices, including its effects on climate change, resource management, and carbon emissions. A score of 70.41 indicates a moderate level of environmental responsibility.
The social score shows the fund’s stance on issues like labor standards, human rights, community engagement, and product safety. A score of 79.11 means it performs well in social areas.
The governance score examines the fund’s practices in board diversity, executive pay, and shareholder rights. At 77.09, it reflects good governance practices.
The controversies score highlights the fund’s engagement in any controversial matters. A score of 29.60 suggests it has a low involvement in controversies.
Overall, the Wahed FTSE USA Shariah ETF has commendable ESG performance in social responsibility, governance, and environmental practices. However, its controversial score indicates room for improvement. Investors valuing ESG might find these scores useful for aligning with their values and sustainability goals.
Analysis of Wahed FTSE USA Shariah ETF (HLAL)
| Analysis | Over a 1 Year Period | Over a 3 Year Period |
| Sharpe ratio | 0.16 | 0.21 |
| Sortinio ratio | 0.12 | 0.19 |
| Treynor ratio | 0.88 | 1.16 |
| Tracking error | 0.46 | 0.93 |
| Information ratio | 0.33 | 0.33 |
| Risk Return Ratio | 0.25 | 0.26 |
| Alpha | 0.17 | 0.31 |
| Beta | 0.98 | 1 |
| Bear Beta | 0.01 | 1.01 |
| Bull Beta | 1.2 | 1.17 |
| R2 | 0.99 | 0.97 |
| Adjusted R 2 | 0.99 | 0.97 |
| Value at Risk normal | -7.7 | -7.54 |
| Value at Risk normal ETL | -10 | -9.82 |
| Value at Risk Quantile | -8.97 | -8.89 |
| Standard Deviation | 19.09 | 18.91 |
| CoVariance | 28.12 | 27.81 |
| Variance | 30.38 | 29.79 |
| Correlation | 1 | 0.99 |
| Downside Deviation Population | 0.25 | 0.53 |
| Semi Deviation | 8.44 | 6.2 |
| Semi Variance | 71.31 | 38.39 |
- Sharpe Ratio: Over one year, the Sharpe Ratio is 0.16%, and over three years, it’s 0.21%, indicating a positive risk-reward balance.
- Sortino Ratio: For one year, the Sortino Ratio is 0.12%, and for three years, it’s 0.19%, demonstrating effective risk management against downside risk.
- Treynor Ratio: In the one-year period, the Treynor Ratio is 0.88%, and over three years, it’s 1.16%, suggesting returns that compensate for systematic risk.
- Tracking Error: The tracking error is 0.46% for one year and 0.93% for three years, showing close alignment with the benchmark’s performance.
- Information Ratio: Both one-year and three-year Information Ratios are 0.33%, reflecting consistent risk-adjusted performance.
- Alpha: In one year, the Alpha is 0.17%, and in three years, it’s 0.31%, suggesting outperformance relative to the benchmark.
- Beta: The Beta is 0.98% for one year and 1.00% for three years, indicating alignment with the market’s price movements.
- Bear Beta: For both one year and three years, the Bear Beta is 1.01%, indicating low sensitivity to market downturns.
- Bull Beta: Over one year, the Bull Beta is 1.20%, and over three years, it’s 1.17%, showing slight sensitivity to market upturns.
- R2: R2 values of 0.99% for one year and 0.97% for three years indicate strong alignment with the broader market.
- Adjusted R2: Both one-year and three-year Adjusted R2 values are 0.99%, indicating a strong correlation with the benchmark.
- Value at Risk (VaR): Over one year, the Value at Risk normal is -7.7%, and for three years, it’s -7.54%, offering insights into potential loss scenarios.
- The Value at Risk normal ETL is -10% for one year and -9.82% for three years, providing an understanding of the extent of potential losses in adverse conditions.
- The Value at Risk Quantile is -8.97% for one year and -8.89% for three years, offering additional information on potential loss estimations.
- Standard Deviation: Moderate volatility levels are evident with a standard deviation of 19.09% (1 year) and 18.91% (3 years).
- CoVariance: Positive CoVariance values suggest the ETF’s returns generally move in the same direction as the market.
- Variance: The ETF’s relatively high variance indicates potential price fluctuations.
- Correlation: The ETF’s strong correlation with the market or benchmark is apparent from its near-perfect correlation values.
- Downside Deviation Population: The ETF demonstrates low volatility in terms of negative returns over the examined periods.
Is it regulated?
HLAL is regulated through its listing on the Nasdaq Global Market Consolidated.
Conclusion on Wahed FTSE USA Shariah ETF
HLAL is an investment fund with a strong focus on socially responsible companies in the United States, as evidenced by its impressive overall ESG score of 76.77, indicating a commitment to investing in environmentally friendly and socially responsible stocks.
When evaluating risk and reward, HLAL has demonstrated a positive Sharpe Ratio of 0.16% (1 year) and 0.21% (3 years), suggesting that the investment has generated returns that effectively compensate for the level of risk undertaken. The Sortino Ratio of 0.12% (1 year) and 0.19% (3 years) further highlights HLAL’s skill in managing downside risk.
In terms of performance relative to its benchmark, HLAL has consistently shown positive alpha values of 0.17% (1 year) and 0.31% (3 years), indicating the potential for the investment to outperform its benchmark during these periods.
Nevertheless, it’s essential to acknowledge areas of concern. The risk-return ratios, represented by -0.25 (1 year) and -0.26 (3 years), reveal that the returns earned may not sufficiently compensate for the associated risks. Additionally, there has been moderate volatility, with a Value at Risk normal of -7.7% (1 year) and -7.54% (3 years), signifying fluctuations in the investment’s value.
Before considering an investment in HLAL, it is highly advisable to thoroughly assess your financial situation, risk tolerance, and specific investment objectives. Consulting with a financial advisor can provide personalized guidance and ensure that your investment aligns with your unique circumstances and goals.
Read more on Wahed here:
- https://islamicfinancesg.com/10-essential-tips-for-investing-with-wahed-invest/
- https://islamicfinancesg.com/shariah-compliant-sarwa-affordable-robo-advisor-alternative-to-wahed-with-lower-remittance-fees/
- https://islamicfinancesg.com/docs/stock-investing/was-doing-my-quarterly-valuation-revision-when-i-realised-that-apples-debt-to-asset-ratio-exceeded-33-then-i-read-somewhere-online-that-the-alternative-way-to-do-this-filtering-is-by-using-debt-to-ma/
