Wealthsimple’s digital investment platform is already changing the way people invest—and today the online financial advisor announced they’ve designed a new portfolio to comply with traditional Islamic laws.
The Toronto-based wealth management company has launched a Halal investing portfolio for Wealthsimple users that are observant Muslims, the company detailed in a press release.
The businesses included in the new portfolio are screened to ensure their activities don’t break Islamic laws and religion rules against profiting from industries directly involved in alcohol, tobacco and gambling, among other activities.
This means that investors adhering to Islamic laws that choose the Halal portfolio are assured they’re not investing in—and profiting from—certain companies and financial products that directly conflict with their religion.
“A lot of the common financial products are off the table for observant Muslims, and many of the available options are expensive or have high minimums,” said Wealthsimple CEO Michael Katchen. “We wanted to offer a portfolio that had all the benefits of our other portfolios while being compliant with Islamic investing practices.”
Wealthsimple partnered with stock analysis company MSCI and its committee of Shariah scholars to design the all-equity portfolio that excludes companies that gain more than 5 per cent of their revenue from prohibited activities.
The Shariah-compliant portfolio includes 50 stocks designed to maximize diversification and closely track the MSCI ACWI Islamic Index.
All stocks are also passed through a financial screen that filters out companies that derive significant income from interest or have considerable leverage—like low risk bonds.
Like Wealthsimple’s other investing portfolios, the process is automated, there’s no account minimum, and the standard fee structure remains. The Halal portfolio also uses the same passive investment strategy.
However, Wealthsimple did state on their website that because the Halal Investing portfolio includes no fixed-income assets—to avoid usury—it is inherently higher risk.
This is the second specially-designed portfolio Wealthsimple has introduced to align investments with values. Last year, they added socially responsible investment options to their offerings.