We’re Halal!
and this how we invest to maintain high level of sharia Compliance.
A summary of Meezan Wealth’s Asset Selection
and Islamic Investment Philosophy
Meezan Wealth engages with IdealRatings who filter out any shares that are not shariah-compliant from the investment universe in accordance with their Shariah Rulebook and Methodology agreed to between IdealRatings Inc (IdealRatings) and ISRA International Consulting Sdn Bhd (ISRA Consulting).
We then use the remaining investment universe to build the direct share component of the portfolios. IdealRatings will also review the holdings of any Exchange Traded Funds that we wish to use to ensure that they have enough of their portfolio invested in Sharia Compliant investments in accordance with the Shariah Rulebook and Methodology agreed to between IdealRatings and ISRA Consulting.
Then, Meezan Wealth, in conjunction with Lifespan Financial Planning acting as an asset consultant for Meezan Wealth, selects investments from the remaining assets to build a portfolio that is predominantly made up of growth and alternative investments, including Australian and International shares, ETFs, property and infrastructure, alternatives and Gold.
Due to your requirement for a Sharia compliant portfolio, we cannot allocate to traditional defensive asset classes such as fixed interest and cash over a certain amount. Therefore, we replaced these asset classes by a larger allocation to Gold, alternatives, other commodities, REITS and in some cases by having a higher allocation to shares than we would normally have in the portfolio
Where possible, We will seek diversification of stocks and sectors. Our approach seeks to maximise risk adjusted returns for the portfolio such that the portfolio outperforms in the medium and long term.
SHARIAH SCREENING
What is Shariah Screening?
Shariah screening is a dynamic process to determine if investment in the equity of a
listed company is permissible from a Shariah perspective.
Shariah Equity screening is guided by a Shariah Equity Screening Criteria.
What is a Shariah-Compliant Equity Investment?
Investments made in equity stocks, screened in accordance with Shariah principles under the guidelines of Shariah supervisory board are called Shariah-compliant equity investments. Such Shariah equity screening is used by Islamic investors to identify a list of Shariah permissible stocks to invest in, while managing their Shariah-compliant portfolio of stocks.
Our Uniqueness
We follow established Shariah screening criteria set up by our well-known Shariah Advisory Board. Our Shariah Equity Screening platform enables Islamic investors access to a pre-screened real-time universe of stocks which are Shariah compliant.
Join our Islamic Super
Business Sector Screening
Financial Ratio Screening
Dividen Purification
BUSINESS SECTOR SCREENING
Business Sector Screening
The business of a company will be conducted in accordance with Shariah principals as interpreted
by a Shariah Advisor. Companies that are involved in the below activities are screened out:
Alcohol
Money
Gambling
Pork Related Products
Tobacco
Advertising
Media & Entertainment
Gold
Companies that earn revenue of less than 5% from the above non permissible activities (excluding non-operating interest income) are still considered to have passed the Business Sector screening criteria.
FINANCIAL SCREENING
Financial Screening
In addition to the business activities screening, Islamic Finance requires the
following financial screening of the listed companies:
Greater than five percent of their revenue coming from haram sources (the “five percent rule”)
Greater than 33 percent total debt as compared to their market capitalization (trailing 12 month average)
Greater than 45 percent accounts receivable as compared to their total assets (trailing 12 month average)
No investment in trust
units is allowed
No investment in any derivatives is allowed
A listed company’s business and financial position could change over time and such changes could affect both the shariah compliance of the company and relative “purification” percentage. These changes could reflect changes in financials as well as income.
ETF Screening Methodology:
The screening process will entail screening each constituent of the ETF Index, based on the Shariah guidelines/Rulebook adopted by the Asset Management Company, for its Equities Shariah Screening Rulebook. As such, the 1st step of the ETF screening process, IdealRatings will screen each constituent in the Index of the ETF. The result will be an Index Constituent pass/fail list.
In addition, the 2nd step of the screening process would be analyzing Index Constituent Fail List such that the total weight of non-compliant stocks within the index tracked by ETFs should not exceeds certain threshold (e.g. 33%) of the index weights.
PURIFICATION PROCESS
Dividen Purification
The disposal of the prohibited income generated from the dividends distribution for non-compliant companies is a must and therefore, Purification for the ETFs is necessary.
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Purification Methodology
IdealRatings, Inc. (IdealRatings) is responsible to ensure all securities provided to Meezan wealth are screened according to the AAOIFI Shariah Rulebook, as required by its client. Meanwhile, ISRA International Consulting Sdn. Bhd. (ISRA Consulting) is responsible to form an independent opinion, as to whether the Shariah screening process carried out by IdealRatings follows the AAOIFI Shariah Rulebook.
The following rulebooks will be used for each asset class:
Equities purification: calculations will be conducted using the AAOIFI rulebook and applying Dividend purification, instead of investment.
REITS purification: calculation will be conduced using the IdealRatings REITs rulebook and applying Dividend purification.
ETF purification: calculation will be conducted using IdealRatings ETFs rulebook and applying Dividend purification as a weighted sum of the non-permissible income ratio of the ETF’s holdings at the dividend’s distribution date multiplied by the ETF dividend.
The purification calculation will be held for each asset class separately based on the type of each asset class and then Lifespan can calculate the portfolio’s total amount of purification through the summation of each asset class amount, including ETF.
