Several key factors went in Malaysian Shariah asset manager Eq8 Capital’s crafting of what became the world’s first Waqf-featured exchange traded fund (ETF), Executive Director and Acting CEO Syed Umar Abdul Rahman Alhadad shared with IFN Investor.
Foremost would be having the ETF units listed on Bursa Malaysia, with the debut on the 10th December 2024 – after an initial offering between the 28th November and the 2nd December 2024.
Syed Umar explained the Malaysian stock exchange listing is an important aspect of this fund offering – to improve transparency of how proceeds are applied for Waqf purposes and also promote liquidity for secondary trading of ETF units – beyond being the main reason for the ‘world first’ claim.
“The additional regulatory and enforcement process which applies to all exchange-listed securities, including full, timely reporting and disclosures, elevates the comfort level of investors that the Waqf operation is strictly monitored.”
In compliance with Bursa Malaysia’s lot trading prescription, investing in the Eq8 FTSE Malaysia Enhanced Dividend Waqf ETF is via 100-unit sets for both direct purchases and secondary trading. But ETF units redeemed with the primary issuer and fund manager Eq8 Capital are dissolved.
The secondary trading availability is meant to persuade investors who are not prepared to fully donate their funds, noted Syed Umar – offering both flexibility and an exit option, rather than it being a locked-in obligation.
The fund operates such that capital gains from buying and selling ETF units go directly to the investor, after deduction of due fees. However, fund proceeds – ranging from dividends to trading gains and more – to be distributed would be split 50:50 between the investor and Waqf entity.
“This is another facility offered to investors, allowing them to get returns as usual and also setting aside some of the gains for charity. The invested capital is also not shaved, subject to the usual market volatility risks.”
A further factor to underpin this ETF is the investment portfolio of mainly equities and up to 10% of the net asset value can be placed in Islamic money market instruments and/or deposits placed with Islamic financial institutions.
Performance of this passively-managed fund is benchmarked against the FTSE Bursa Malaysia EMAS Shariah Factor Enhanced Target Dividend Index, allowing for a diversified portfolio covering several economic sectors – rather than the typical focus on physical assets, with associated expenses.
“The Waqf experts we consulted were pleased with this diversified approach, which can better mitigate the investment risk and produce optimal gains to be used for charitable purposes,” said Syed Umar.
The current beneficiary for this Eq8 fund is Malaysian government-run Yayasan Waqaf Malaysia – the fund’s proceeds shall be distributed to identified projects in the sectors of education, healthcare, economic empowerment, environment sustainability and other beneficial initiatives.
With the Bursa listing completed, Syed Umar said Eq8 Capital will be ramping up its marketing efforts to garner investors both locally and abroad – as this fund has a cap of one billion units.
