The Top 9 Islamic and Sharia-Compliant Funds: Your Guide to Halal ETFs

Are you looking to invest according to Islamic values? Sharia or Halal ETFs let you invest according to Islamic religious law. Here are the top nine funds to get you started.

Anna Ng   Updated January 26th, 2022

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How do I invest in Sharia-compliant companies?

The Sharia includes Islamic religious and legal principles, which can also apply to investments and financial instruments. Islamic faith-based mutual funds and ETFs let you invest according to your values.

Formulated in consultation with Islamic scholars, Sharia-compliant funds exclude companies involved in charging interest (such as banks and insurance companies), pork processing, alcohol, tobacco, weapons, gambling, and pornography.

They also screen out businesses with a lot of debt. Islamic finance practitioners like to point out that Sharia-compliant funds weathered the storm in 2008-2009 by avoiding highly leveraged businesses.

Because interpretations of Islamic law vary among scholars, investment criteria may differ. To resolve this issue, Sharia finance consultants like Yasaar Ltd, which advised on the FTSE Shariah USA Index, represent all major Sharia schools of thought. Some funds follow the rules of the Accounting and Auditing Organization for Islamic Financial Institutions.

Sharia investing with Saturna Capital

Saturna Capital is the best known provider of Sharia-compliant mutual funds. The Amana fund family includes four funds totaling over $5 billion in assets. Their funds follow both Islamic principles and environmental, social, and governance (ESG) investing principles. They eliminate companies engaged in activities like:

  • Charging interest
  • Gambling
  • Pork
  • Alcohol
  • Tobacco
  • Pornography
  • Weapons

The guidelines for Amana Funds were established in consultation with the Fiqh Council of North America (FCNA), a non-profit Muslim organization. Saturna Capital also works with Amanie Advisors Sdn Bhd, an Islamic finance consultancy.

How have Sharia-compliant funds performed?

Sharia-compliant funds have different investment styles, but many of them did better than the S&P 500 in recent years.

For example, the largest Sharia-compliant fund, the Amana Growth Fund, beat the S&P 500 both last year and over the past ten years, an impressive feat. The fund returned almost 33% over the past three years, vs. 26% for the S&P 500, and 18% over the past ten years, vs. 16.5% for the S&P.

The largest halal ETF, the Wahed FTSE USA Shariah ETF, also beat the S&P 500 in both 2020 and 2021. The fund hasn’t been around long enough to see the long-term track record, though.

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The top Islamic funds

Islamic and Sharia-compliant fund list

  • Amana Growth Fund (AMAGX)
  • Amana Income Fund (AMANX)
  • Amana Participation Fund (AMAPX)
  • Wahed FTSE USA Shariah ETF (HLAL)
  • SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS)
  • Amana Developing World Fund (AMDWX)
  • SP Funds Dow Jones Global Sukuk ETF (SPSK)
  • SP Funds S&P Global REIT Sharia ETF (SPRE)
  • Wahed Dow Jones Islamic World ETF (UMMA)
FundTickerTypeExpense RatioAssets ($m)2021 Return
Amana Growth Fund
AMAGX
Mutual fund
0.95%360032%
Amana Income Fund
AMANX
Mutual fund1.04%
1600
23%
Amana Participation FundAMAPX
Mutual fund
0.82%
226
0%
Wahed FTSE USA Shariah ETF HLAL
ETF0.50%
164
29%
SP Funds S&P 500 Sharia Industry Exclusions ETF
SPUS
ETF0.49%13236%
Amana Developing World Fund
AMDWX
Mutual fund
1.20%717%
SP Funds Dow Jones Global Sukuk ETF
SPSK
ETF0.59%
40
-1%
SP Funds S&P Global REIT Sharia ETFSPRE
ETF0.69%3246%
Wahed Dow Jones Islamic World ETF UMMA
ETF0.65%22
-

Learn more about each fund.

Amana Growth Fund (AMAGX)

  • Expense ratio: 0.95%
  • Best for: actively managed mutual fund focused on growth

With over $3.6 billion in assets, the Amana Growth Fund is the largest Islamic fund available to U.S. investors. The fund aims to help you grow your wealth while excluding businesses that don’t align with Islamic principles.

AMAGX doesn’t invest in alcohol, tobacco, pork processing, interest-based banks, insurance, gambling, and pornography. An actively managed fund, AMAGX can invest in both U.S. and foreign stocks, with a tilt to large-cap names. Because Islamic principles discourage speculation, the fund has a long-term investment horizon.

In December 2021, the Amana Growth Fund invested in 36 stocks, many of them large tech stocks like Apple, Intuit, and chip-maker ASML Holding.

AMAGX has a good track record beating the S&P 500 Index, showing that investing in line with your values doesn’t mean you have to sacrifice performance.

The minimal initial investment is $250, and the fund costs 0.95% annually, which is normal for an actively managed mutual fund, though more expensive than an ETF that tracks an index.

Amana Income Fund (AMANX)

  • Expense ratio: 1.04%
  • Best for: actively managed mutual fund focused on income

The second largest Sharia-compliant fund, the Amana Income Fund, has over $1.6 billion in assets under management. This actively managed mutual fund was established in 1986 and seeks to help investors preserve their capital while generating dividend income. AMANX mostly invests in dividend-paying stocks.

In December 2021, AMANX invested in 32 stocks, including the top three Eli Lily, Microsoft, and Rockwell Automation.

Like other funds in the Amana family, AMANX excludes companies that sell alcohol, pornography, insurance, or businesses engaged in gambling, pork processing, and charging interest.

The fund’s investment style is conservative, and the fund did not do as well as the S&P 500 since its inception. AMANX has a $250 minimum investment and charges 1.04% annually.

Amana Participation Fund (AMAPX)

  • Expense ratio: 0.82%
  • Best for: Sharia-compliant bond alternative mutual fund

The Amana Participation Fund is the first non-stock, halal income fund in the U.S. The fund seeks to earn income for its investors and preserve capital, investing in Islamic income-producing certificates like sukuk, murabaha, and wakala. These instruments let investors fund assets in return for a share of profits. Investors can earn an income without charging interest, which would be unacceptable under Islamic law.

Sukuk certificates generate returns from an asset, such as an airplane. Murabaha certificates involve a purchase and sale contract, and wakala certificates operate under the Islamic finance principle of wakala, an agency agreement. Like bonds, sukuks can be rated by major rating agencies like S&P Global Ratings.

Investments never fund businesses like liquor, casinos, pornography, insurance, pork processing, or banks.

AMAPX invests globally, though at least 50% of its securities must be USD-denominated. On December 31, 2021, the fund had about 35 sukuk investments.

AMAPX is the Sharia-compliant alternative to a bond fund, and, like with a normal bond fund, performance in 2021 was not spectacular. The fund returned less than 1%. However, it’s one of the two bond alternatives for U.S.-based Muslim investors.

AMAPX costs 0.82% each year and requires a $250 minimum investment.

Wahed FTSE USA Shariah ETF (HLAL)

  • Expense ratio: 0.50%
  • Best for: U.S. stock halal ETF

Launched in 2019, the Wahed FTSE USA Shariah ETF (HLAL) is the largest Sharia-compliant exchange-traded fund in the U.S. Cheaper than a mutual fund, HLAL passively invests in an index of stocks compliant with Islamic principles.

The FTSE Shariah USA Index was developed in partnership with Yasaar Ltd, an impartial consultancy and leading authority on Shariah law. The index has also been certified as Sharia-compliant through a fatwa (Islamic legal opinion) issued by Yasaar Ltd. Yasaar’s scholars represent all major Sharia schools of thought.

HLAL owns over 200 U.S. stocks, excluding companies with excess debt, usurious institutions, and businesses involved in alcohol, firearms, adult entertainment, gambling, pork, and tobacco. On December 31, 2021, the top holdings were Apple, Tesla, and Johnson & Johnson.

HLAL is a low-cost Sharia-compliant fund, with a 0.50% expense ratio. Moreover, HLAL outperformed the S&P 500 both in 2020 and 2021.

SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS)

  • Expense ratio: 0.49%
  • Best for: U.S. stock halal ETF

Established in 2019, the SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS) invests in companies in the S&P 500 index ex stocks that don’t comply with Islamic law. SPUS excludes alcohol, gambling, weapons, tobacco, adult entertainment, pork products, credit cards, and interest-based businesses. Companies with a lot of debt are also excluded.

SP Funds is a fund manager dedicated to Sharia-compliant finance. They manage money according to the rules from the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and under the guidance of their ethical advisor, Imam Omar Suleiman.

In December 2021, the fund had over 200 holdings. The top three were big tech stocks Apple, Microsoft, and Google. However, SPUS owns fewer than half the stocks in the S&P 500, outperforming the S&P 500 in both 2020 and 2021.

SPUS has an annual expense ratio of 0.49%.

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Save and invest spare change

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Work with human advisors

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0.49%-0.89%

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Amana Developing World Fund (AMDWX)

  • Expense ratio: 1.20%
  • Best for: emerging markets mutual fund

The Amana Developing World Fund is the Islamic alternative to an emerging markets equity fund. This fund invests in emerging market stocks that abide by Islamic principles. As with other Amana funds, alcohol, tobacco, pornography, insurance, gambling, pork processing, and interest-based businesses like banks are excluded.

AMDWX owns about 40 stocks, mostly in the technology, consumer, and healthcare sectors.

The fund has a $250 minimum investment and charges 1.20% annually. Despite high fees, AMDWX did quite well over the past year, returning over 7% when emerging markets generally had a negative return.

SP Funds Dow Jones Global Sukuk ETF (SPSK)

  • Expense ratio: 0.59%
  • Best for: Sharia-compliant bond alternative (sukuk) ETF

The SP Funds Dow Jones Global Sukuk ETF (SPSK) is a Sharia-compliant alternative to a bond fund. Launched in 2019, SPSK lets you invest in sukuk certificates. By investing in a sukuk, you own a portion of a pool of assets, which generate revenue that is then distributed to sukuk holders. Sukuk doesn’t involve interest.

Exclusively dedicated to Sharia-compliant finance, SP Funds also manages the SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS).

SPSK costs 0.59%, yielding 1.32% (as of December 31, 2021). But, like regular bonds, SPSK didn’t do well in 2021, returning -1.3% to investors.

SP Funds S&P Global REIT Sharia ETF (SPRE)

  • Expense ratio: 0.69%
  • Best for: Sharia-compliant real estate fund

The SP Funds S&P Global REIT Sharia ETF (SPRE) is a Sharia-compliant real estate fund. Launched in late 2020, the fund returned over 46% in 2021.

SPRE invests in real estate investment trusts (REITs) with low debt levels. Investments must be involved in halal business activities. The top holdings include the warehousing REIT Prologis and cell tower REITs American Tower and Crown Castle.

The fund costs 0.69%.

Wahed Dow Jones Islamic World ETF (UMMA)

  • Expense ratio: 0.65%
  • Best for: halal international stock ETF

Launched in January 2022, the Wahed Dow Jones Islamic World ETF (UMMA) invests in Sharia-compliant foreign (non-US) stocks in both developed and emerging markets. UMMA adds ESG considerations, too.

UMMA is an alternative to a more expensive fund from Amana funds, the Amana Developing World Fund (AMDWX). The fund excludes stocks in companies involved in alcohol, tobacco, weapons, pork-related products, conventional financial services, and entertainment. Top holdings include chip-maker TSMC, Samsung Electronics, and Tencent Holdings.

This actively managed ETF has an expense ratio of 0.65% and over $22 million in assets under management. It’s too early to tell what performance will be like.

💰 Which Sharia-compliant ETF is best?

  • Certified Sharia-compliant ETFs like Wahed FTSE USA Shariah ETF (HLAL) are much cheaper than mutual funds and even have a record of beating the S&P 500. Although past performance doesn’t guarantee future performance, HLAL, the largest Islamic ETF in the U.S., is not a bad place to start

NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.

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