A key driver behind Manulife’s addition of Islamic funds is Canada’s sizable and growing Muslim population. (Shutterstock)

Islamic Finance

Canada’s Manulife adds Islamic funds to meet growing demand in North American market 

Manulife, a Toronto-based insurance and financial services firm with around $826 billion of assets under management, has added two Sharia-compliant funds to its portfolio to meet growing demand from Canadian Muslim investors.

Manulife Canada Retirement launched the Manulife SP Funds S&P 500 Shariah Industry Exclusions ETF (exchange traded fund) Fund and the Manulife SP Funds Dow Jones Sukuk ETF Fund to its iWatch platform.

SP Funds are part of ShariaPortfolio, a US-based boutique asset management firm specialising in socially responsible and halal investing. The firm also has a presence in Canada.

A key driver behind Manulife’s addition of these Islamic funds is Canada’s sizable and growing Muslim population. Muslims make up around 3.2% (or over one million people) of the nation’s population, according to a 2017 study by Statistics Canada. This is expected to grow to somewhere between 5.6% to 7.2% by 2036.

“With over a million Canadians identifying as Muslim, there have been a limited amount of professionally managed investment options that align with Shariah law,” said a Manulife spokesperson. “This has forced many Muslim plan members to potentially accept alternate solutions that can have implications to their overall retirement savings.”

The SP Funds S&P 500 Shariah Industry Exclusions ETF (SPUS) is an existing instrument which aims to track the performance–before fees and expenses–of the S&P 500 Sharia Industry Exclusions Index, co-developed by S&P Dow Jones Indices and by SP Funds. The SP Funds Dow Jones Sukuk ETF (SPSK) aims to track the performance–before fees and expenses–of the Dow Jones Sukuk Total Return (ex Reinvestment) Index.

The instruments are available to both Manulife’s savings sponsors and members in Canada. Sponsors can choose to add them as an investment option under their group savings plans. Sponsors are defined as an entity, often an employer, that sponsors group savings plan. The plan is also available to members, which are defined as individuals that opt into the group savings plans.

“Manulife is now offering two segregated funds that have been certified as Shariah-compliant with broad equity and fixed income exposure to meet the needs of Muslim Canadian group plan members and other group plan members interested in halal investments,” said the Manulife spokesperson.

The Islamic Finance Advisory Board (IFB), a Canada-based Sharia advisory board which provides advice and guidance, certified the funds as Sharia compliant and will audit them annually. “All Sharia EFTs work under the same Sharia guidelines but are slightly different from each other in terms of their objectives,” said Tahmyna Qazi, Liaison at Islamic Finance Advisory Board. “[For example], the two Manulife EFTs have the following objectives:  SPUS is a fund that invests only in US Equity with the objective of having a variable income, and SPSK invests globally to have a fixed income.”

The Manulife spokesperson said that whilst they can’t anticipate the flow of these segregated funds, they wanted to provide two funds so plan members can properly diversify portfolios.

“Manulife will follow the demand of the product through continued consultation of our plan sponsors and members,” said the spokesperson.

Adding to growing Canadian asset universe

Manulife’s addition of these new Islamic funds to its portfolio comes amid growing activity in the Islamic asset universe offering in Canada. 

Earlier this year, Toronto-based Wealthsimple launched Canada’s first ever listed halal ETF (Wealthsimple Shariah World Equity Index ETF) which aims to replicate the Dow Jones Islamic Market Developed Markets Quality and Low Volatility Index

Wealthsimple’s Islamic ETF joins a growing number of ETFs in the market including Wahed Invest’s FTSE Shariah ETF, SP Funds S&P Global REIT Shariah ETF and depending on the broker access to BlackRock’s suite of iShares Islamic ETFs.

Mohamad Sawwaf, co-founder & CEO of Manzil, a digital platform that offers Sharia compliant financing and investment solutions, welcomed Manulife’s inclusion of these funds.

“It's definitely a good move as it allows Canadian Muslims to access Sharia compliant ETFs for their group plans while not having their funds sit in cash with no return,” he said. “This will also allow SP ETFs to grow their assets under management much more rapidly due to the increased distribution.”

Naushad Virji, CEO of ShariaPortfolio said it can be challenging to enter a new market. “It’s important to show people that this is a viable solution to their needs,” he said. “Even though our USA affiliate has around 20 years of experience, we have only been in Canada for about two years. We are already seeing a greater degree of interest in our services.”

He said SP Funds are working with other major asset managers including Franklin Templeton in the USA which is using one of their ETFs in their multi-asset mutual fund. “We are in talks with several banks around the world in structuring similar products for their institutions. In addition, we have many asset managers around the world using our ETFs for both Muslim clients and also clients looking for investments with minimal leverage. A number of robo-advisors have also included our funds in their offerings.”

More products needed

Whilst Manulife’s funds inclusion has been welcomed, market participants have called for more products to serve consumer needs.

“The market needs to expand its Sharia compliant product offerings especially in the financing space: cars, equipment leasing, commercial real estate etc,” said Sawwaf. “This is still a major gap along with Shariah compliant bank accounts (i.e., deposit and day to day transaction).”

Qazi said that there is a strong halal retail market and also an evolving halal investment products market in Canada, all due to the grassroots demands of the local Muslim communities.

“The challenges we see Muslims facing is mainly a shortage of halal mortgage products in the country as opposed to demand for such products,” said Qazi. “However, due to the active involvement of the Canadian Muslim consumers, the market is evolving more than some other western countries.”

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