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Robo-adviser Wealthsimple launches investment portfolio for observant Muslims

Last Updated Aug 23, 2017 at 10:20 am EDT

TORONTO – Robo-adviser Wealthsimple has launched a new investment portfolio for observant Muslims, a move the company says builds off its success targeting smaller, underserviced groups of investors.

The Toronto-based wealth management firm says its Halal investing portfolio is designed for those adhering to Islamic laws that prohibit investing in certain companies and financial products.

Wealthsimple CEO Michael Katchen hopes the portfolio will resonate with a portion of the public, the same way its socially responsible investment portfolio options launched last year have.

“With socially responsible investing, people thought it was going to be a such a small niche, that it wouldn’t be worth our time, but it turned out to be enormously successful,” Katchen said.

“We now see a third of our clients in socially responsible portfolios. We realized there was an opportunity to create solutions for groups of people that were underserviced in the financial services industry — and in this case, with Muslims who hold certain religious beliefs and really don’t have options when it comes to investments.”

Katchen said there are only a handful of Islamic-compliant portfolio options available in Canada, some of which he said have “egregiously expensive” management expense ratio fees upward of more than 2.8 per cent as well as high account size minimums.

Wealthsimple’s Halal portfolio will have the same fee structure as its other core offerings, with 0.5 per cent on the first $100,000 invested and no account minimum.

Market size has also figured into its introduction of the portfolio, Katchen said.

With slightly more than one million Canadians identifying themselves as Muslim in the latest census, representing 3.2 per cent of the total population, “it’s important to us that we go after opportunities that represent growth,” he said.

Wealthsimple designed its Halal portfolio with global index provider MSCI, using a methodology approved by its committee of Shariah scholars.

The all-equity portfolio, which uses the same passive investment strategy as Wealthsimple’s other portfolios, is comprised of 50 stocks designed to maximize diversification and closely track the MSCI ACWI Islamic Index.

The stocks included in the portfolio are filtered using two processes. A business activity screen filters companies that are directly active in, or derive over five per cent of their revenue from, a prohibited Muslim activity such as alcohol, tobacco, gambling or pork production. A financial screen filters out companies that derive significant income from interest or have considerable leverage.

Katchen said Wealthsimple will continue to launch new products that introduce solutions for investors who are underserviced or improve upon offerings that are already in the market.

“If you look at our history, we generally try to lead with innovative new products and services a few times a year, so I think you can expect more stuff from us.”

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Note to readers: This is a corrected story. An earlier version misspelled Katchen.