Shariah Compliant UAE Equity ETF From Chimera Capital
Abu Dhabi-based Chimera launches the UAE’s first ETF tracking a Shariah-compliant index.
The Chimera S&P UAE Shariah ETF is a sub-fund of the Chimera Umbrella Fund, the first SCA umbrella fund to be launched in the UAE. The ETF’s shares will trade on the Abu Dhabi Securities Exchange with gains reinvested into the fund while class B shares will be listed on the Dubai Financial Market with dividends distributed to investors. (ETF Strategy)
Chimera S&P UAE Shariah ETF
The ETF will track the S&P UAE Domestic Shariah Liquid 35/20 Capped Index through direct physical replication.
It will charge an expense ratio of 1.00%.
HSBC Middle East and BNY Mellon’s London branch will act as local custodian and global custodians, respectively.
Chimera’s onshore company, Chimera Capital LLC, which is licensed by SCA as an investment management company with approval to establish and manage investment funds, will manage the fund.
Shariah and UAE – a dual opportunity
Said Chairman, Chimera Capital: “The Chimera S&P UAE Shariah ETF allows investors to capitalize on the prospects of the UAE’s economy while staying true to the principles of Shariah and with the added flexibility of choosing between regular portfolio returns or maximizing future investment returns thanks to the ETF’s dual share class option.”
The Index is provided by S&P Dow Jones Indices and tracks the performance of UAE-based Shariah-compliant liquid equities. Investors seeking exposure to the UAE economy through Shariah-compliant investments are likely to be drawn to the fund.
The screening for compliance is as follows. As a first step, companies that are prohibited under Shariah laws are excluded. These are alcohol, tobacco, pork, pornography, gambling, cloning, banking, and finance, and advertising and media (except certain news and sports segments).
In a second-level screening, the companies are screened for financial ratios including leverage, cash, and the share of revenues derived from non-compliant activities.
The index uses the 35/20 nomenclature because it is weighted by float-adjusted market capitalization. It caps the weight of the largest constituent at 35% and the weight of any other constituent at 20%.
Listing on Dubai Financial Market
“The listing of the distributing Class B of Chimera S&P UAE Shariah ETF will provide the DFM’s large and diversified base of local and international investors with a new product to invest in companies represented in the S&P UAE Domestic Shariah Liquid 35/20 Capped Index,” said Hassan Al Serkal, Chief Operating Officer (COO) and Head of Operations Division of DFM. “Undoubtedly, this step will further strengthen the leading position of the DFM as the first Shariah-compliant exchange globally, a position it has held since 2007.”
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