Gradual rise in Shariah compliant ETFs

The first Shariah compliant ETF was launched in January 2007. Since then the evolution in the methodologies used by index providers to create appropriate Shariah compliant indices has resulted in well-defined indices acceptable to a broad constituency of Islamic investors. This in turn has led to the development of suitable investment products.

The availability of indices has allowed the widespread introduction of lower-cost products such as ETFs with defined exposures and high levels of transparency.

Shariah compliant ETFs have some advantages for investors compared with traditional ways of gaining Shariah exposures. These have tended to be actively managed products with a lack of transparency surrounding methodology and lower levels of diversification that are also more costly.

The main providers of Shariah compliant indices