Subscriptions open for Chimera JP Morgan Global Sukuk ETF: How to invest

ETFs on the ADX

In 2023, the Abu Dhabi Securities Exchange (ADX) emerged as the most active ETF market in the Middle East and North Africa (MENA) region, demonstrating significant growth in trading volume and value. 

According to data published by state news agency, WAM, ETF trading on ADX surged by 364.2 per cent, reaching Dhs4.507bn, as of October 2023. 

Additionally, the volume of traded ETF units increased by 405.8 per cent, totaling 815.7 million units, compared to 161.2 million units in 2022. 

The number of ETF transactions also rose sharply by 284.2 per cent, with 30,800 transactions recorded last year.

Furthermore, ADX broadened its ETF portfolio last year, by listing several new funds, including the Chimera – Standard & Poor’s China Hong Kong Shariah ETF, Chimera FTSE Abu Dhabi 15 fund, and an ETF tracking Shariah-compliant stocks on the Istanbul Stock Exchange. 

Q. What are Sukuk and how do they work?

Sukuk are financial instruments compliant with Sharia law, issued by governments or corporations to raise funds.

Unlike conventional bonds, Sukuk represent ownership in a tangible asset, business, or project. Sukuk typically pay periodic returns (coupons) and return the principal at maturity. They provide a Sharia-compliant way for investors to earn returns while financing various ventures.

Q. What is the investment objective of the Chimera JP Morgan Global Sukuk ETF?

The ETF aims to deliver returns, before fees and expenses, that mirror the performance of the JP Morgan Global Investment Grade Sukuk Index.

This index tracks the most liquid, USD-denominated Islamic debt instruments from various global issuers, focusing on investment-grade sovereign, quasi-sovereign, and corporate Sukuk with substantial issuance amounts.

Q. What investment strategy does the Chimera JP Morgan Global Sukuk ETF employ?

The ETF employs a sampling strategy, selecting a representative subset of the index’s constituents to closely match the index’s performance, it said in its regulatory filing.

This approach ensures efficient tracking while allowing for quarterly dividend payouts when available.

Q. What are the costs associated with the Chimera JP Morgan Global Sukuk ETF?

The total expense ratio (TER) of the ETF is 0.50 per cent. This includes management fees as well as other administrative and operational expenses, making it a cost-effective way to invest in a diversified portfolio of Sukuk.

Q. How can you invest in Sukuk?

Investing in Sukuk can be done through:

• Primary Market: Buying directly from the issuer during the initial offering.
• Secondary Market: Purchasing from other investors via brokers or trading platforms, which might require a higher minimum investment. For smaller, more diversified investments, Sukuk ETFs like the Chimera JP Morgan Global Sukuk ETF provide an accessible option.

Q. Why should one consider investing in a Sukuk ETF?

Investing in a Sukuk ETF offers several advantages:

• Diversification: ETFs pool funds to invest in a wide array of Sukuk, spreading risk.
• Accessibility: They provide exposure to global Sukuk markets without the need for large capital.
• Stability: Sukuk ETFs often focus on investment-grade issuances, offering a relatively stable investment option. For example, the Chimera JP Morgan Global Sukuk ETF includes Sukuks from sovereigns, quasi-sovereigns, and corporates, providing broad exposure and reducing the risks associated with investing in a single issuer.

Q. How can investors subscribe to the Chimera JP Morgan Global Sukuk ETF?

Investors can subscribe to the ETF units during the Initial Offering Period (IOP) which runs until July 2, at an offering price of $1 (Dhs3.67) per unit.

Subscriptions can be made through the ADX eIPO investor portal or via authorised participants including International Securities, EFG-Hermes, Arqaam Securities, FAB Securities, Daman Securities, and BHM Capital.

Read: Abu Dhabi Securities Exchange ETF market surpasses Dhs1.4bn in traded value