Abu Dhabi-based asset manager Chimera Capital has unveiled a new ETF in the United Arab Emirates providing Shariah-compliant exposure to Turkish equities.
The fund is the first ETF listed in the UAE to provide Shariah-compliant exposure to Turkish equities.
The Chimera S&P Turkey Shariah ETF (CHTRSHIN) is available to trade through a distributing share class on the Abu Dhabi Securities Exchange (ADX).
The fund comes with an expense ratio of 1.00%.
Syed Basar Shueb, Chairman of Chimera Capital, commented: “The launch of Chimera Capital’s ninth ETF further broadens the range and diversity of the company’s listed ETF products which give investors access to multiple stock markets, and contributes to the further deepening and expanding of the UAE capital markets.”
Saeed Hamad Al Dhaheri, Managing Director and CEO of ADX, added: “We are delighted to welcome another ETF listing by Chimera Capital as we work towards enhancing market liquidity and making ADX a regional hub for a broad array of sector and geographically-focused ETFs. ADX continues to execute its strategy of introducing the widest array of products and services to provide investors with more flexibility and greater opportunities for hedging and diversification.”
Investment approach
The fund is linked to the S&P Turkey Shariah Liquid 35/20 Capped Index which begins with an initial universe of stock listed on Borsa Istanbul with average daily trading volumes greater than $250,000.
S&P Dow Jones Indices screens the universe for firms that are aligned with Islamic principles. The index provider has contracted Ratings Intelligence Partners, a London/Kuwait-based consulting company specializing in solutions for the global Islamic investment market, to provide the Shariah screens. Ratings Intelligence Partners’ team consists of qualified Islamic researchers who work directly with a Shariah Supervisory Board to interpret business issues and recommend actions for the indices.
As defined by Ratings Intelligence Partners, non-compliant companies are those that derive more than 5% of their revenue from conventional finance (non-Islamic banking, finance, insurance, etc), alcohol, pork-related products, entertainment (casinos, gambling, and pornography), tobacco, and weapons, arms, and defence manufacturing.
Companies permissible under the business activity test must also comply with a series of balance sheet and income statement screens. These include debt to equity, accounts receivable to equity, and cash to equity ratios below 33%.
After both screens, the index selects the 20 most liquid stocks from the remaining universe. Constituents are weighted by float-adjusted market capitalization while capping the largest stock at 35% and any other stock at 20%. Rebalancing occurs quarterly with buffer rules helping to limit unnecessary turnover.
As of the end of July, stocks from the consumer staples and materials sectors each accounted for a third of the total index weight with the next-largest sector exposures being industrials at 10% and financials at 6%.
Notable positions included BIM Birlesik Magazalar (33.7%), Bera Holdings (7.5%), Gubre Fabrikalari (7.4%), Nuh Cimento Sanayi (6.1%), and Oyak Cimento Fabrikalari (5.8%).
The ETF is supported by BNY Mellon, which acts as the fund’s custodian. International Securities, EFGHermes, Arqaam Capital, Daman Securities, and BHM Capital are acting as authorized participants.
The fund has come to market approximately one month after Chimera introduced two ETFs which are the first in the UAE to provide Shariah-compliant exposure to US equities.