Hakan Ozyon

Hejaz Group, a leading global Islamic Finance provider, has launched Australia’s first ever Sukuk active exchange-traded fund (active ETF), enabling investors to access a Shariah-compliant bond alternative product for the first time.

The Hejaz Sukuk Active ETF (Managed Fund), will be available on the ASX from 2 November 2023. The Hejaz Sukuk Active ETF (Managed Fund) (ASX:SKUK) will enable retail, wholesale and institutional investors in Australia and New Zealand to invest in a shariah-compliant fixed-income asset that is comparable to a traditional bond ETF.

Unlike traditional bonds which derive yield from debt interest, Sukuk are financial certificates that appreciate as the value of the underlying asset grows. Sukuk are issued in global markets and structured to comply with Islamic law, with investor returns considered to be profit sharing rather interest. Under shariah principles, the earning or payment of interest is not permitted.

Managed by Hejaz Asset Management, the Hejaz Sukuk Active ETF (Managed Fund) is comprised of a diversified portfolio of Shariah-compliant Sukuk investments from the Bloomberg Global Aggregate USD Sukuk Index. Hejaz Asset Management is targeting a return of 8 per cent per annum, after fees.

Hakan Ozyon, CEO, Hejaz Group said: “Hejaz was founded to give Australian Muslims the opportunity to grow their wealth without compromising their beliefs, by giving them access to world-class halal financial products. The Hejaz Sukuk Active ETF (Managed Fund) fills a substantial gap in the market by enabling Muslims and non-Muslims to access an ultra-ethical fixed-income product – considered a defensive asset – for the first time. Alongside our equities and property ETFs, and new account-based pension offering, our Sukuk Active ETF shows Hejaz is fulfilling our promise to a support Muslims financial needs with first and best-in-class products.”

The global Sukuk market was valued at USD 915 billion in 2022 and is expected to reach a value of USD 2.3 trillion by 2028, based on a predicted cumulative annual growth rate (CAGR) of 16.2% from 2023 to 2028.i

Equity Trustees will be trustee for the Hejaz Sukuk Active ETF (Managed Fund), with Apex Financial Services Group acting as administrator and custodian, and Nine Mile as the market maker.

Andrew Godfrey, Executive General Manager, Superannuation Trustee Services, Equity Trustees said: “This is another example of the Hejaz team developing innovative financial solutions that solve real-world needs for a community with specific requirements and preferences. We’re pleased our specialist trustee and governance expertise can facilitate the launch of this purpose-built product.”

Andrew Campion, GM, Investment Products, ASX, said “Our vision is to ensure that there are a broad range Investment Products available on ASX that enable investors and their advisers to construct quality portfolios. The Hejaz Sukuk ETF is an excellent example of broadening the choice that investors have in the Australian market”.

Hejaz currently has $1.3 billion in funds under management and advice. Its Global Ethical Fund is Australia’s largest standalone Islamic fund, while the Hejaz Equities Fund (Managed Fund) (ASX:ISLM) and Hejaz Property Fund (Managed Fund) (ASX:HJZP) were the first Islamic finance products to be quoted on the ASX.  In September 2023 it launched the Hejaz Islamic Super and Pension, the first Islamic account-based pension to be offered to Australian consumers directly.

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General Manager, Investment Products and Strategy, Andrew Campion, said: “The ASX Australian Investor Study is ASX’s flagship research that provides an authoritative guide on the evolution of investment markets and investor behaviour.

“Our latest study has found that the number of investors that hold on-exchange investments has grown from 6.6 million to 7.7 million in 2023 – the highest proportion of on-exchange investors in over a decade. This equates to 38 per cent of Australian adults.

“While Australian shares are still the most popular of all on-exchange investments, exchange traded funds (ETFs) continue to grow in popularity with 20 per cent of investors holding such investments, up from 15 per cent three years ago. This growth aligns with ASX’s latest statistics where total ETF funds under management has grown by an astonishing $80 billion from $63.5 billion in May 2020 to $143.5 billion as at the end of May 2023

“The report also compares holdings of different asset classes and found that there’s been a slight dip in residential property investment (down four per cent), but gains in shares and ETFs, suggesting Australians are looking at other ways to build wealth outside of property.”

While females made up half of the 1.2 million net new investors since 2020, women are still under-represented as a whole (42% vs 58%), with more women than men citing affordability as their primary barrier to investing.

Read the report.

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The Fund uses a global multi-asset approach investing across equities, bonds, real assets and total return strategies. Its objective is to deliver positive long-term returns of 5% p.a. in excess of inflation over a rolling five-year period.

Bruce Murphy, Insight Investment Director of Australia and New Zealand commented: “The key step we took when designing this strategy for clients 15 years ago was replacing benchmarks with a risk budget. This was a transformational step which has allowed us to deliver what we see as consistent performance at materially lower risk levels relative to competitors offering more traditional strategic asset allocation-driven processes. Importantly, we understood that many retirees are faced with the prospect of drawing down on their capital at the wrong time; our approach aims to manage investors’ sequencing risk while providing growth asset exposures and upside potential.”

Andrew Campion, General Manager, Investment Products at ASX commented: “We are delighted to attract Insight Investment, an internationally recognised fund manager, to our growing mFund platform. Australian investors are increasingly looking to diversify their portfolios and can easily do so by accessing different asset classes and investment expertise via our transparent platform.”

Insight Investment launched the strategy in Australia in 2014. The fund size is currently A$250 million1 and Insight manages an additional A$2.4 billion1 in the strategy under separate accounts on behalf of Australian institutional investors. Total assets under management for Insight Australia is A$30 billion and A$1.2 trillion globally1

The Fund is currently ‘Recommended’ by Zenith and Lonsec, and available on BT, Macquarie, OneVue, Netwealth and Hub24 platforms.

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