SP Funds S&P 500 Sharia ETF (SPUS) seeks to track the performance of the S&P 500 Shariah Index, which includes large-cap U.S. companies that comply with Islamic investment principles by excluding businesses involved in alcohol, tobacco, gambling, conventional finance, and other prohibited activities.
How It Works
SPUS uses a passively managed, market-capitalization-weighted approach that mirrors its Shariah-compliant benchmark index. The fund screens S&P 500 companies for Islamic compliance, excluding those deriving significant revenue from prohibited activities, then weights remaining holdings by market value. Quarterly rebalancing maintains alignment with index changes and ongoing Shariah compliance reviews. Holdings typically number 300-400 companies, representing roughly 70-80% of the traditional S&P 500.
Key Features
- Only ETF providing Shariah-compliant exposure to large-cap U.S. stocks with systematic Islamic screening methodology
- Maintains broad diversification across sectors while excluding financials, creating technology and healthcare sector overweights
- Zero expense ratio makes it cost-competitive with traditional S&P 500 ETFs despite specialized screening requirements
Risks
- This ETF can lose value when large-cap U.S. stocks decline, potentially dropping 30-40% during severe market downturns like 2008-2009
- Sector concentration risk exists as financial sector exclusion creates overweights in technology and healthcare, amplifying sector-specific volatility
- Shariah compliance screening reduces diversification compared to broad market ETFs, potentially increasing tracking error during market stress periods
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.