SA’s first Shariah-compliant ETF

11 March 2009

Absa Capital has launched South Africa’s first Shariah-compliant equity-linked exchange traded fund (ETF).

The initial public offering for the NewFunds Shariah Top 40 Index ETF opened on 23 February, while the ETF will be listed on the JSE on 6 April.

“The Shariah Top 40 Index ETF is a first for South Africa and will redefine the Muslim investment landscape in South Africa,” Absa Capital’s Vladimir Nedeljkovic said in a statement last month.

“The ETF is a cost-efficient, transparent and easy-to-access investment product that conforms to the principles of Shariah law.”

Serving the market

Nedeljkovic said that he expected the new offering to be well-received in a market that urgently required more local Islamic investment products to service the estimated 400 000 Muslim households in South Africa.

“The Shariah Top 40 Index ETF provides investors with diversified exposure to the broad market through investing in one Shariah-compliant ETF share and earning a market-related performance,” he said.

Absa Capital said the new ETF offered a credible Islamic investment opportunity, aligning the South African Islamic investment market with global trends.

Absa Capital’s NewGold ETF, the largest ETF in the South African market, with approximately R9-billion in assets, is also Shariah-compliant, having been approved by the Shariah Supervisory Board.

FTSE/JSE Shariah Top 40 Index

The Shariah Top 40 Index ETF tracks the FTSE/JSE Shariah Top 40 Index jointly established by London’s FTSE International and the JSE. The Shariah screening of the index constituents is performed by Yasaar using a two-step methodology.

Yasaar represents all major Shariah schools of thought, creating a best practice approach that has credibility across all regions of the Islamic world, and the ongoing screening of the Shariah compliance of the ETF is conducted by Absa’s Islamic Banking Shariah supervisory board.

SAinfo reporter