Wahed FTSE USA Shariah ETF (HLAL) seeks to track the FTSE USA Shariah Index, which measures the performance of large- and mid-cap U.S. stocks that comply with Islamic investment principles. The index excludes companies involved in alcohol, tobacco, gambling, weapons, and conventional banking while screening for acceptable debt-to-equity ratios.
How It Works
HLAL uses a passively managed, market-capitalization-weighted approach that mirrors its Shariah-compliant benchmark index. The fund holds constituent stocks in proportion to their market value after Islamic screening filters remove non-compliant companies. Index rebalancing occurs semi-annually in June and December to maintain Shariah compliance and reflect market cap changes. The strategy typically results in 200-400 holdings with technology and healthcare sectors often overweighted due to screening criteria.
Key Features
- Only U.S. equity ETF offering comprehensive Shariah compliance screening for both business activities and financial ratios
- Excludes entire sectors like conventional banking and alcohol, creating unique sector allocation compared to broad market ETFs
- Semi-annual Shariah board review ensures ongoing compliance with Islamic investment principles and removes newly non-compliant stocks
Risks
- This ETF can lose value if Shariah-compliant companies underperform the broader market, as screening excludes many large financial sector stocks
- Sector concentration risk exists since Islamic screening typically results in higher technology and healthcare weightings than diversified market ETFs
- During broad market downturns, this ETF will decline alongside U.S. equities, potentially losing 30-40% in severe bear markets like 2008
Who Should Own This
Best suited for Muslim investors seeking Shariah-compliant U.S. equity exposure as a core holding (30-50% of equity allocation) with 5+ year time horizons. Medium-to-high risk tolerance required due to equity volatility and sector concentration. Works well for investors prioritizing religious compliance over maximum diversification in retirement or taxable accounts.