An Exchange-Traded Fund (ETF) is an innovative financial product that exhibits the best of open-ended fund and listed stock features. In the Securities Commission Malaysia’s Exchange-Traded Funds Guidelines, ETF is defined as “a listed index-tracking fund structured as a unit trust scheme or any other approved structure whose primary objective is to achieve the returns that correspond to the performance of a particular index”. To put it simply, ETF is actually a unit trust listed and traded on a stock exchange. It is passively managed in general as ETF aims to replicate the performance of a particular market index, either by investing all (full replication) or substantially all (strategic sampling) in the constituent securities.

What is i-ETF?

Unlike conventional ETFs that have the liberty to track any benchmark index regardless of the Shariah status of the component stocks, an i-ETF tracks only the benchmark index where the index constituents are Shariah-compliant companies. Apart from that, the management of i-ETF has to strictly observe the Shariah principles and Islamic investment guidelines. The operation of i-ETF is also overseen by a Shariah board, committee or advisor who will conduct Shariah-compliant audits and reviews from time to time.

A fund shall undergo a comprehensive Shariah screening exercise before it can qualify as an i-ETF . The screening of the index constituents is done in accordance with the methodology prescribed by the Shariah board, committee or advisor of the index provider, the regulatory body and the fund itself. To ensure continuous Shariah compliance, the Shariah screening is undertaken at the time of the investment decision and subsequently throughout the investment period. The aforementioned periodic monitoring for Shariah compliance does take into account any corporate actions like mergers and acquisitions, delisting or bankruptcy. The i-ETF is consequently purified from time to time by identifying, separating and donating to charity any Shariah non-compliant income.

How to invest in i-ETF ?

Just like stocks, i-ETF can be bought and sold through stockbrokers. At present, there are seven (7) i-ETFs listed and traded on the Exchange:

• MyETF Dow Jones Islamic Market Malaysia Titans 25 (MyETF-DJIM25)
• MyETF Dow Jones US Titans 50 (MyETF-US50)
• MyETF MSCI Malaysia Islamic Dividend (MyETF-MMID)
• MyETF MSCI SEA Islamic Dividend (MyETF-MSEAD)
• MyETF Thomson Reuters Asia Pacific ex-Japan Islamic Agribusiness (MyETF-AGRI)
• Trade Plus Shariah Gold Tracker (GOLDETF)
• Eq8 FTSE Malaysia Enhanced Dividend Waqf ETF (EQ8WAQF)

Why invest in i-ETF ?

Diversified Exposure

• Through one unit of i-ETF, investors get immediate exposure to the companies that constitute the tracked index.
• Cost effectiveness
  As the fund is passively managed, the management fee is considerably low. This makes i-ETF an economical long-term investment.
• Simplicity
  i-ETF is listed on Bursa Malaysia's Main Market just like stocks; trading of i-ETF units is done at its current market price in a single transaction. Investors may do it online or through their stockbrokers.
• Transparency
  The i-ETF price is readily available on real-time basis throughout the trading day. Other comprehensive and updated information pertaining the i-ETF, such as daily fund value and quarterly manager report, can be obtained from the fund manager’s website.