Shariah-aligned funds: A new investment offering from Manulife for Retirement Plan Members

For followers of Islam, investing isn’t always as simple as taking the top recommendation from a financial advisor. In order to align with Shariah principles, an investment must exhibit many qualities – including environmental and ethical considerations and excluding interest and excessive debt.

Published data from Statistics Canada show that in 2017 over one million Canadians – or 3.2% of the population - identified as Muslim. This is expected to grow to between 5.6% and 7.2% by 20361. After considering our own values and the feedback from our clients, and to provide an alternative investment option for members of the Canadian Muslim community, we are now offering two professionally managed investment solutions that align with Shariah principles and are certified as Shariah-compliant by the Islamic Finance Advisory Board (Canada).

What is Shariah-aligned investing?

While generating returns is still a priority for funds that abide by the principles of Shariah, there are several other considerations.

Shariah-aligned funds must not invest in companies that derive more than 5% of their total income from pork products, the sale of alcohol, pornography, gambling and other industries and activities prohibited by the Muslim faith. To the extent that any income, however small, is derived from non-compliant sources (such as interest), investors who invest with a Shariah approach are instructed to purify this income by making an equivalent charitable donation. For adherence to these rules, these funds must appoint a Shariah board, require an annual Shariah audit, and report the purification ratio to investors.

Providing options for Muslim plan members

Muslim plan members have had limited options when it comes to investment opportunities that align with their religious beliefs. Funds that invest with a Shariah approach can offer a solution for Muslims looking to invest in alignment with their religious or personal values. Most importantly, these Shariah-aligned investment solutions help provide an opportunity for all plan members to participate in their group retirement savings plans.

That’s one of the reasons we are offering products that meet their retirement investment needs – we wanted to help those members who until now have had limited investment opportunities to have greater access to financial opportunities. We were listening to our clients, plan sponsors, who also recognized this opportunity and saw its value for their employees. With this new offering, we will enable our sponsors with more opportunities to support their employees, communities, and attract diverse talent to their companies thanks to inclusive retirement offerings.

Manulife is adding two funds which align with Shariah principles to the i-Watch platform -- the Manulife SP Funds S&P 500 Shariah Industry Exclusions ETF and the Manulife SP Funds Dow Jones Sukuk ETF Fund. With these new funds, Muslim plan members can build a diverse portfolio with broad equity and fixed income-like exposure and align their retirement portfolio with their religious values and their risk tolerance.

Offering funds like these creates opportunities for an underserved and often-overlooked segment of plan members.  Members will no longer be limited to products that may not meet their needs, choose to go against their religious beliefs, or decline to participate in their company’s retirement plan. These new funds make investing and saving for retirement more easily accessible to every member.

1Statistics Canada: “Canada Day... by the numbers (2017)” and “A look at immigration, ethnocultural diversity and languages in Canada up to 2036, 2011 to 2036”

The information in this article is not to be relied upon as legal, tax, financial, investment advice for specific situations. 

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