New Listing

HSBC AM launches Europe’s first sukuk ETF

HBKU tracks the FTSE IdealRatings Investment Grade index

Tom Eckett

Olga De Tapia

HSBC Asset Management has expanded its Shariah-compliant range with the launch of Europe’s first global sukuk ETF.

The HSBC Global Sukuk UCITS ETF (HBKU) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.70%.

HBKU tracks the FTSE IdealRatings Investment Grade index which offers exposure to sukuk – sometimes referred to as ‘Islamic bonds’ – across the globe.

The index incorporates over 150 Shariah standards and is subject to oversight by a team of scholars who are responsible for designing Shariah-compliant investment products.

It also looks to meet the standards of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

Under the methodology, any sukuk that fails to comply with mandatory Shariah standards will not be deemed Shariah-compliant and will be excluded from the index.

Sukuk were first issued in the early 2000s in order to circumvent the interest-paying bond structure which is prohibited under Shariah law.

According to data from Fitch Ratings, global sukuk issuance hit $765.3bn in 2022, 7.6% higher versus the year previously.

HBKU is an ETF share class of an existing fund that was launched in January.

Olga de Tapia, global head of ETF and indexing sales at HSBC AM, said: “HBKU allows HSBC AM to meet growing global demand for Islamic passive products, either as standalone investments or as part of broader Shariah-compliant multi-asset portfolios.

“This should provide choice to Islamic investors enabling them to build a range of different portfolios, with different risk characteristics, on the same terms as conventional investors."

In November 2022, the UK asset manager unveiled five Shariah-compliant equity ESG ETFs targeting different regional and global exposures, ETF Stream revealed.

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