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HSBC Islamic Global Equity Index Fund

Aims to create long term appreciation of capital through investment in a diversified portfolio of securities as defined by a relevant world index, which meets Islamic investment principles as interpreted and laid down by the Shariah Supervisory Committee and provided to the Board of Directors.

Shariah philosophy

Islamic finance is a system of financial activities that are consistent with Shariah (Islamic law)

Major principles of Islamic Finance that differ from conventional finance are:

  • Ban on interest (Riba)
  • Ban on uncertainty (Gharar): transactions involving uncertainty, risk
  • Ban of speculation, gambling (Maisir)
  • Risk-sharing and profit-sharing: both parties in a financial transaction must share the associated risks and profits
  • Ethical Investments that enhance society: Investment in industries that are prohibited by the Quran such as alcohol, pornography, gambling and pork-based products is discouraged
  • Asset-backing: each financial transaction must be tied to a “tangible, identifiable underlying asset”

Our process

  • The fund tracks the DJ Islamic Market Global Titans 100 Index which is Shariah compliant
  • The fund follows an investment process that has been approved by an independent Shariah committee
  • The Shariah committee monitors the fund throughout the year and issues an annual Shariah certificate on the fund’s compliance with Shariah principles. This certificate is included in the annual financial report of the fund as a confirmation of the Shariah compliance for that year

HSBC strengths

  • We harness the intellectual capital of a global network of over 200 equity specialists in 20+ countries and territories
  • Our fundamental research adds value within a disciplined framework

Key risks when investing

  • Investment risk: The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Lower volatility may result in a lower return relative to the reference index
  • Counterparty Risk: The possibility that the counterparty to a transaction may be unwilling or unable to meet its obligations
  • Derivatives Risk: Derivatives can behave unexpectedly. The pricing and volatility of many derivatives may diverge from strictly reflecting the pricing or volatility of their underlying reference(s), instrument or asset.
  • Exchange Rate Risk: Changes in currency exchange rates could reduce or increase investment gains or investment losses, in some cases significantly.
  • Index Tracking Risk: To the extent that the Fund seeks to replicate index performance by holding individual securities, there is no guarantee that its composition or performance will exactly match that of the target index at any given time (“tracking error”).
  • Investment Leverage Risk: Investment Leverage occurs when the economic exposure is greater than the amount invested, such as when derivatives are used. A Fund that employs leverage may experience greater gains and/or losses due to the amplification effect from a movement in the price of the reference source.
  • Liquidity Risk: Liquidity Risk is the risk that a Fund may encounter difficulties meeting its obligations in respect of financial liabilities that are settled by delivering cash or other financial assets, thereby compromising existing or remaining investors.
  • Operational Risk: Operational risks may subject the Fund to errors affecting transactions, valuation, accounting, and financial reporting, among other things

For more information on the HSBC Islamic Global Equity Index Fund strategy, contact us.