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Islamic finance provider moves to fill ‘substantial gap’ in ETF market

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Hejaz Group’s new active ETF provides investors with access to a Shariah-compliant bond alternative product in what the firm has described as an Australian-first.

Islamic finance provider Hejaz Group has filled what it believes is a “substantial gap” in the Australian market with the launch of the country’s first Sukuk active ETF.

The Hejaz Sukuk Active ETF (Managed Fund) provides investors with access to a Shariah-compliant fixed-income asset which Hejaz said is comparable to a traditional bond ETF. It will begin trading on the ASX on Thursday under the ticker code SKUK.

Hejaz explained that Sukuk differ from traditional bonds in that they are financial certificates which appreciate as the value of their underlying asset grows.

“Sukuk are issued in global markets and structured to comply with Islamic law, with investor returns considered to be profit sharing rather than interest. Under Shariah principles, the earning or payment of interest is not permitted,” the firm noted.

Hejaz Group chief executive officer Hakan Ozyon said the new ETF aligns with a founding principle of the firm to give Australian Muslims the opportunity to grow their wealth without compromising their beliefs.

“The Hejaz Sukuk Active ETF (Managed Fund) fills a substantial gap in the market by enabling Muslims and non-Muslims to access an ultra-ethical fixed-income product – considered a defensive asset – for the first time,” he said.

“Alongside our equities and property ETFs, and new account-based pension offering, our Sukuk Active ETF shows Hejaz is fulfilling our promise to support Muslims’ financial needs with first and best-in-class products.”

The new ETF consists of a diversified portfolio of Shariah-compliant Sukuk investments from the Bloomberg Global Aggregate USD Sukuk Index. Hejaz Asset Management, which is managing the fund, aims to deliver a return of 8 per cent per annum after fees.

Equity Trustees is the trustee of the ETF, with Apex Financial Services Group acting as administrator and custodian and Nine Mile as the market maker.

“This is another example of the Hejaz team developing innovative financial solutions that solve real-world needs for a community with specific requirements and preferences,” commented Andrew Godfrey, executive general manager, superannuation trustee services at Equity Trustees.

“We’re pleased our specialist trustee and governance expertise can facilitate the launch of this purpose-built product.”

Andrew Campion, general manager of investment products at ASX, added: “Our vision is to ensure that there are a broad range of investment products available on ASX that enable investors and their advisers to construct quality portfolios. The Hejaz Sukuk ETF is an excellent example of broadening the choice that investors have in the Australian market”.

Hejaz noted that the global Sukuk market, which was valued at US$915 billion in 2022, is forecast to grow to US$2.3 trillion over the next five years.

The firm currently has a total of $1.3 billion in funds under management and advice. It launched Australia’s first Sharia-compliant ETFs, the Hejaz Equities Fund and the Hejaz Property Fund, in October last year.

Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.