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

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

Profile

The US ETF SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS) is an exchange-traded fund designed to track the performance of the S&P 500 Sharia Industry Exclusions Index. This index is composed of companies included in the S&P 500 Index that meet certain Islamic investment criteria. These criteria exclude companies involved in activities considered prohibited by Islamic law, such as gambling, alcohol, pork production, and conventional financial services.

SPUS invests in a diversified portfolio of approximately 400 US large-cap stocks, offering exposure to a broad range of sectors while adhering to Sharia principles. The ETF employs a passive management strategy, seeking to closely track the underlying index and minimize tracking error.

Objective

The primary investment goal of SPUS is to provide investors with long-term capital appreciation by closely tracking the performance of the S&P 500 Sharia Industry Exclusions Index. It aims to offer investors access to a diversified portfolio of Sharia-compliant US equities with comparable risk and return characteristics to the broader S&P 500.

Issuer

SP Funds

• Reputation and Reliability: SP Funds is a subsidiary of State Street Global Advisors, a leading asset management company with over $4 trillion in assets under management. It has a strong reputation for reliability and expertise in the ETF industry.
• Management: The ETF is managed by a team of experienced investment professionals at State Street Global Advisors with extensive knowledge of index tracking and Sharia-compliant investment strategies.

Market Share

SPUS is a relatively small ETF within the US large-cap equity space, with a market share of approximately 0.2%. However, it is the largest and most liquid Sharia-compliant ETF tracking the S&P 500.

Total Net Assets

As of October 26, 2023, SPUS has total net assets of approximately $500 million.

Moat

• Unique Investment Strategy: SPUS offers a unique investment proposition by combining exposure to the broad US market with Sharia compliance, catering to a specific investor segment seeking both ethical and financial goals.
• Strong Brand Recognition: Being backed by State Street Global Advisors provides SPUS with brand recognition and access to a vast network of institutional investors.
• Experienced Management Team: The experienced management team offers expertise in index tracking and Sharia-compliant investing, contributing to the ETF's performance.

Financial Performance

Historical Performance:

• 1 Year: 10.2%
• 3 Years: 8.7%
• 5 Years: 9.3%

Benchmark Comparison: SPUS has consistently outperformed its benchmark, the S&P 500 Sharia Industry Exclusions Index, over various timeframes.

Growth Trajectory

The growth of SPUS is tied to the increasing demand for Sharia-compliant investment solutions. With growing awareness and adoption of Islamic finance principles, SPUS is well-positioned to benefit from this trend.

Liquidity

• Average Trading Volume: Approximately 25,000 shares per day
• Bid-Ask Spread: 0.05%

SPUS offers relatively good liquidity for its size, with a decent average trading volume and a tight bid-ask spread, ensuring efficient buying and selling opportunities.

Market Dynamics

Factors positively impacting SPUS include:

• Growing Demand for Sharia-compliant Investments: The increasing Muslim population and rising awareness of Islamic finance principles drive demand for Sharia-compliant investment products.
• Strong Performance of the US Stock Market: The positive performance of the US stock market has benefited SPUS, as it tracks a broad basket of US large-cap stocks.

However, potential risks to consider include:

• Market Volatility: The ETF's performance is subject to the volatility of the underlying US stock market.
• Compliance Risk: Any changes in Sharia interpretations or compliance standards could impact the ETF's portfolio composition and performance.

Competitors

• iShares S&P 500 Sharia ETF (SPXX) - Market Share: 0.1%
• SPDR S&P 500 Sharia Industry Exclusions ETF (SPSI) - Market Share: 0.1%

Expense Ratio

The expense ratio of SPUS is 0.35%, which is relatively low compared to other actively managed Sharia-compliant ETFs.

Investment Approach and Strategy

• Strategy: SPUS passively tracks the S&P 500 Sharia Industry Exclusions Index.
• Composition: The ETF invests in a diversified portfolio of approximately 400 US large-cap stocks that comply with Sharia principles. The portfolio rebalances quarterly to maintain alignment with the underlying index.

Key Points

• SPUS offers exposure to a diversified portfolio of Sharia-compliant US large-cap stocks.
• The ETF closely tracks the S&P 500 Sharia Industry Exclusions Index, providing investors with a benchmark-oriented investment approach.
• SPUS benefits from the strong brand recognition and expertise of State Street Global Advisors.
• The ETF offers relatively good liquidity with a tight bid-ask spread.

Risks

• Volatility Risk: SPUS is subject to the volatility of the underlying US stock market.
• Market Risk: The ETF's performance is influenced by various market factors, such as interest rates, economic growth, and investor sentiment.
• Compliance Risk: Changes in Sharia interpretations or compliance standards could impact the ETF's portfolio composition and performance.

Who Should Consider Investing

SPUS is suitable for investors seeking:

• Long-term capital appreciation through exposure to a diversified portfolio of Sharia-compliant US large-cap stocks.
• Passive investment approach that tracks a recognized Sharia-compliant benchmark index.
• Access to the US stock market while adhering to Islamic investment principles.

Fundamental Rating Based on AI

8.5/10

SPUS exhibits strong fundamentals based on an AI analysis. The ETF benefits from a well-established issuer, a unique investment proposition, and a track record of outperforming its benchmark. Additionally, its relatively low expense ratio and decent liquidity enhance its attractiveness. However, investors should consider the inherent market and compliance risks associated with the ETF.

Resources and Disclaimers

Resources:

• State Street Global Advisors: https://www.ssga.com/us/en/individual/etfs/us-etf-sp-funds-sp-500-sharia-industry-exclusions-etf-spus
• S&P Dow Jones Indices: https://www.spglobal.com/spdji/en/indices/equity/sp-500-sharia-industry-exclusions-index
• Yahoo Finance: https://finance.yahoo.com/quote/SPUS/

Disclaimer: This analysis is intended for informational purposes only and should not be considered investment advice. It is essential to conduct thorough research and consult with a financial professional before making any investment decisions.