Shariah compliant tracker

masonic

Linton said:

masonic said:

MX5huggy said:

Have I got the wrong funds? HSBC seems much better that iShares 

You have the correct funds (there is a GBP version of the HSBC fund, but performance of the USD unit class rebased to GBP is more or less the same). The MSCI World Islamic Index (used by iShares) appears to have excluded Microsoft, Apple, Amazon, Tesla, Google, Facebook and Nvidia from its index. The Dow Jones Islamic Market Titans 100 Index (used by the HSBC fund) includes all of those companies. The indexes being tracked by the two funds are therefore hugely different. If your own Islamic principles do not permit you to invest in those companies then you would have no choice but to opt for the more restrictive iShares ETF, but if your principles are more relaxed you could have gone for the HSBC fund. While the HSBC fund has less stringent criteria, it is a more concentrated index with only around 100 holdings vs >300 in the iShares ETF.

mmm - IIRC last time I checked the MSCI Islamic index was very high in tech but now it is far mor e reasonable.  The HSBC index however is 33% tech and 13% in the the relatively new Communications Services sector which includes facebook,  Netflix and Alphabet)(Google).  Looking at the largest underlying investments gives a total of 32% of the whole fund to Microsoft, Apple, Facebook, Amazon and Alphabet.  Tesla is 2.8%.   North America is 74.5%.  The whole of the UK gets less than half the amount allocated to Microsoft.  This is not what one should expect from a broadly based global investment.

So I would certainly not recommend the HSBC fund to anyone who did not understand the downsides.

I suppose it comes with the territory of "index investing" using highly subjective criteria and contrived indexes. If as you say the MSCI index has changed dramatically over time, that would be another red flag. It speaks to my previous comment around the compatibility of index investing with a focus on a cherry-picked subset of the market. At least with an active fund the manager is not constrained in balancing the portfolio.