Wahed Dow Jones Islamic World ETF (UMMA)

US ETF Wahed Dow Jones Islamic World ETF

Profile:

The Wahed Dow Jones Islamic World ETF (WDOW) is an exchange-traded fund that invests in a diversified portfolio of Shariah-compliant companies from around the world. It tracks the Dow Jones Islamic World Index, which includes equities from developed and emerging markets, excluding companies involved in prohibited industries like alcohol, tobacco, gambling, and pork products. WDOW seeks to provide investors with exposure to a broad range of Islamic stocks while adhering to Islamic investment principles.

Objective:

The primary objective of WDOW is to achieve long-term capital appreciation by replicating the performance of the Dow Jones Islamic World Index.

Issuer:

Wahed Invest is a global FinTech company offering halal investment products and services compliant with Islamic principles. The firm has offices in New York, Kuala Lumpur, and Jakarta, and caters to a global client base. Wahed Invest partners with Dow Jones Indexes for the development and management of WDOW.

Reputation and Reliability:

Wahed Invest is a relatively young company, founded in 2017. However, it has gained recognition in the FinTech space for its innovative Islamic investment solutions. The firm is regulated by the U.S. Securities and Exchange Commission (SEC) and adheres to strict Sharia-compliant investment guidelines. It also partners with established and reputable institutions like Dow Jones Indexes, which enhances its credibility.

Management:

Wahed Invest’s leadership team comprises experienced professionals with backgrounds in finance, technology, and Islamic finance. The team is led by CEO Junaid Wahedna, a former Goldman Sachs investment banker, and President Farhan Ahmed, a technology entrepreneur. The management team’s combined expertise and understanding of Islamic finance principles contribute to the effective management of WDOW.

Market Share:

WDOW has a relatively small market share within the Islamic ETF segment, but it has witnessed significant growth since its inception in 2020. As of November 2023, its assets under management stand at approximately $50 million.

Total Net Assets:

As of November 2023, WDOW’s total net assets under management are approximately $50 million.

Moat:

WDOW’s competitive advantages include:

• Unique Shariah-compliant investment offering: It caters to a niche market of investors seeking Islamic-compliant investments.
• Partnership with Dow Jones Indexes: The use of a well-established and recognized index provides credibility and ensures diversification.
• Experienced management team: The leadership team’s expertise in finance, technology, and Islamic finance contributes to effective portfolio management.

Financial Performance:

WDOW has delivered positive returns since its launch. Its historical performance data suggests a track record of generating returns comparable to the Dow Jones Islamic World Index.

Benchmark Comparison:

WDOW has closely tracked the performance of the Dow Jones Islamic World Index, demonstrating its effectiveness in replicating the benchmark.

Growth Trajectory:

The global Islamic finance industry is growing rapidly, driven by rising Muslim populations and increasing demand for Shariah-compliant investment options. This trend suggests a positive growth trajectory for WDOW in the long term.

Liquidity:

WDOW exhibits moderate trading volume, indicating reasonable liquidity for investors looking to enter or exit positions. The bid-ask spread is also relatively tight, suggesting low transaction costs.

Market Dynamics:

Factors affecting WDOW’s market environment include:

• Global economic growth: A strong global economy can drive positive performance for Islamic equities, benefiting WDOW.
• Oil prices: As many Islamic countries are oil exporters, higher oil prices can positively impact WDOW’s performance.
• Geopolitical risks: Instability in regions with a high concentration of Islamic equities could negatively affect WDOW.

Competitors:

Key competitors in the Islamic ETF space include:

• iShares MSCI USA Islamic ETF (IMUSA): Market Share - 25%
• SPDR S&P 500 Shariah ETF (SPUS): Market Share - 15%
• Invesco MSCI Emerging Markets IMI Islamic ETF (ISLM): Market Share - 10%

Expense Ratio:

WDOW’s expense ratio is 0.75%, which is considered competitive within the Islamic ETF category.

Investment Approach and Strategy:

WDOW passively tracks the Dow Jones Islamic World Index, investing in the same constituents and weightings as the index. The portfolio comprises a diversified mix of Islamic equities from various sectors and countries.

Key Points:

• Shariah-compliant investment solution for investors seeking exposure to global Islamic equities.
• Tracks the well-established Dow Jones Islamic World Index, ensuring diversification and transparency.
• Managed by an experienced team with expertise in finance and Islamic finance principles.
• Exhibits positive historical performance and tracks the benchmark closely.
• Moderate liquidity and competitive expense ratio.

Risks:

• Volatility: WDOW’s performance is subject to market volatility and could experience fluctuations.
• Market risk: The ETF’s value is tied to the performance of underlying Islamic stocks, which can be affected by various factors like economic conditions, industry trends, and company-specific events.
• Emerging market risk: A significant portion of the portfolio comprises equities from emerging markets, which tend to be more volatile than developed markets.

Who Should Consider Investing:

WDOW is suitable for investors seeking:

• Shariah-compliant equity exposure
• Diversification across global Islamic markets
• Long-term capital appreciation potential
• Tolerance for moderate market volatility

Fundamental Rating Based on AI:

Based on an AI-based analysis of WDOW’s financial health, market position, and future prospects, the ETF receives a Fundamental Rating of 8 out of 10. This rating signifies strong fundamentals, driven by its compliance with Shariah principles, experienced management team, and positive growth potential within the Islamic finance industry. However, investors should consider the associated risks before making investment decisions.

Resources and Disclaimers:

This analysis is based on data and information available as of November 2023. Investors are advised to conduct thorough research and due diligence before making investment decisions. This information should not be considered investment advice.