When it comes to halal investing, one of the biggest decisions youā€™ll face is whether to go for a low-cost fund that simply tracks the market, or to pay more for a professional manager to try and beat it. The Schroders Islamic Global Equity Fund is a good example of this choice in practice, and it gives us a useful way to think through the trade-offs.
This is a traditional investment fund, not an ETF. That means it doesnā€™t trade throughout the day like a stock. Instead, it is priced once daily, and all buying and selling happens at that set price. The fund invests globally, giving exposure to companies across different regions and sectors, rather than focusing on any one country.
What makes this fund different is that it is actively managed. A fund manager is making decisions about which companies to invest in, which to avoid, and when to adjust positions. The goal is to outperform the market, specifically the Dow Jones Islamic Market World Index. In contrast, a passive fund would simply track that index, holding the same companies and charging a lower fee, without trying to outperform.
There have been periods where this active approach has worked well. For example, in 2021 the fund fell by 2.2% while the index dropped by 7.3%, which is a meaningful difference. However, over a slightly longer period the picture becomes less clear. Over three years, the fund returned 46.9% compared to 53.5% for the index it is trying to beat. This highlights one of the key realities of active management: it can outperform in some periods, but it can also fall behind, and it is not always consistent.
The cost of this approach is also worth paying attention to. The fund charges 0.55% per year, which is higher than many Sharia-compliant ETFs that sit closer to 0.30%. While that difference may seem small, it compounds over time. These fees are not charged separately but are taken gradually from the fundā€™s value, which means they quietly reduce your overall returns over the long term.
From a Shariah perspective, the fund does handle purification on your behalf. Any impermissible income is calculated and donated to charity, which removes that burden from the investor. It is also an accumulation fund, meaning any dividends are automatically reinvested rather than paid out. This is generally more suitable for those building wealth over the long term.
In terms of what the fund actually holds, it is still quite similar to the broader global market despite being actively managed. Around 70% of the portfolio is in US companies, with a strong weighting towards technology. There are some differences compared to the index, such as slightly higher exposure to Japan and slightly lower exposure to the US, but overall the structure remains fairly close to a global equity allocation.
Because this is not an ETF, it is not typically available on newer investing apps like Trading 212. Instead, it is usually accessed through more traditional platforms such as AJ Bell or Hargreaves Lansdown.
Ultimately, whether this fund is worth it comes down to what you value. If you prefer a fully hands-off approach with professional oversight and built-in purification, an active fund like this may appeal. But if your focus is on keeping costs low and capturing market returns in a simple and consistent way, passive options are often difficult to beat.
Active management can work, but it does not always. And over the long term, the combination of cost and consistency tends to play a much bigger role than trying to outperform the market.
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