Wahed is fundamentally not investing in a novel way: it invests in familiar and trusted investment options: (i) halal equity funds; (ii) sukuk (Islamic bonds); and (iii) gold. This is not a bad thing. It means it isn’t like the whole host of other rather dubious Islamic investment options out there, why it has attracted the backing of prominent scholars such as Sh. Yasir Qadhi, and raised $20m in venture capital backing.
What is novel about Wahed however is that it is the first company that:
- packages the whole combination of investment assets together;
- offers a sharia-compliant platform within an ISA tax-efficient wrapper;
- charges lower fees than you would get charged otherwise
- allows you to access certain assets that you wouldn’t otherwise easily get access to (e.g. sukuk and emerging markets); and
- enables you to get going with just £100 and lets you withdraw/deposit without cost whenever you want.
Don’t get me wrong, there are other places you can do one or more of the above. But there’s none that we’ve come across that let you do all that in one place and through a relatively slick online user interface. Surprising I know – but sadly the Muslim fintech space is still catching up to the mainstream market!
Wahed is not perfect of course. It is a start-up that is growing fast, and with that come inevitable growing pains and having to stretch internal resources to capacity. This can occasionally have an impact on customer service. This is something that we’ve seen them improving and actively working on, and we expect further progress in the coming months.
Another annoying thing is that you can’t just fund your account using your card. You have to deposit using your bank, which adds a little delay and an extra step you have take. Again, this is something I think they will sort as they scale bigger.
In this article we thoroughly stress-test Wahed’s numbers and claims as well as the overall experience and alternative options available.
Before we dive into the full review, a quick note:
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The sections of this review are:
- What can you invest in using Wahed?
- Is it cost-effective and competitive?
- How does the Wahed Platform work?
- How best can I use Wahed?
What can you invest in using Wahed?
Wahed is akin to a brokerage platform or a financial adviser in that it doesn’t invest money into its own funds. What it does do is it allocated your money across a variety of other funds that you can buy (more on whether you should just buy these directly below). The main funds/instruments it invests in are the below.
- iShares MSCI World Islamic UCITS ETF USD (Dist)
- HSBC Islamic Global Equity Index GBP IC
- iShares MSCI EM Islamic UCITS ETF USD (Dist)
- Franklin Global Sukuk Fund W(Qdis)
- ETFS Physical Gold (GBP)
These are all basically pooled funds where the money is invested into a variety of stocks and shares (for instruments 1-3), sukuk (instrument 4) or straight-up no-nonsense gold (instrument 5). The pooled approach gives you the benefit of a diversified portfolio with relatively little investment (something you wouldn’t be able to cost-effectively do if you tried to actually buy all the underlying stocks/sukuk in each of the funds). So when you invest with Wahed you’ll end up indirectly holding potentially hundreds of underlying stocks and shares, sukuk and, of course, some gold.
Is it cost-effective and competitive?
This is the big question. Wahed even has an FAQ on “why wouldn’t I buy securities suggested by Wahed directly?” Their answer is:
While you may be able to buy the securities suggested by Wahed directly through your broker, you may not be able to get them all at the same time in a cost-effective and efficient manner. In addition, some brokers may require a high minimum investment to open an account. Wahed’s service also monitors and facilitates the periodical rebalancing of your portfolio at no additional cost.
More importantly, you may not be able to open and monitor an account in the same seamless manner as you do with Wahed. With Wahed’s advanced technology, you can open an account online and in minutes and get access to global markets.
But let’s test that.
Can I buy the securities in one place at another major broker?
In short, no. Not any mainstream ordinary-person broker anyway.
I looked at Hargreaves Landsdowne and IG.com, two very large and reputable online brokers in the UK. The far column of the table below highlights up which instruments I could easily purchase through them. Importantly I couldn’t purchase global equities and sukuk funds – which for me are quite important (but more on that later).
|Instrument||Costs and Charges||Easily available elsewhere?|
|iShares MSCI World Islamic UCITS ETF USD (Dist)||0.6%||Yes|
|HSBC Islamic Global Equity Index GBP IC||0.53%||No|
|iShares MSCI EM Islamic UCITS ETF USD (Dist) (0.85)||0.85%||Yes|
|Franklin Global Sukuk Fund W(Qdis)||1.1%||No|
|ETFS Physical Gold (GBP)||0.39%||Yes|
So Wahed passes test 1.
Can I buy the securities in a cost-effective manner elsewhere?
In short, not really. However, as you become a larger investor (>£250,000) then you should reassess the market carefully for a better deal as you may find one.
So how does Wahed’s fee structure work? Well for the UK it is as follows (for someone like me who has invested below £250,000):
So for the year, I’m looking at 1.92% all in (0.16% x 12) which I’ll be paying.
So the question is, can I beat that going elsewhere?
I’ve picked a couple of instruments from the ones Wahed offered and ran them through Hargreaves Lansdowne.
Here is a snapshot from Hargreaves Landsdowne on the costs associated with you investing in “iShares MSCI EM Islamic UCITS ETF USD (Dist)” through them:
Here is another snapshot for “ETFS Physical Gold (GBP)”:
So lets say for the sake of argument that Hargreaves had all 5 instruments offered by Wahed and we are going to create a like-for-like portfolio over 5 years investing £3000.
HL would charge per annum:
- HL management fees: 0.45% [£67.50 over 5 years]
- HL transaction fees: £120 (each instrument will need to be bought and sold once, and there’s 5 of them. One trade costs £12.)
- HL: Fund costs – these are the same so I won’t analyse these.
HL total over 5 years: £187.50
Wahed would charge per annum:
- Wahed management fees: 0.99% [£148.5 over 5 years]
- Wahed transaction fees: £7.50 [£1.50 per year for 5 years]
- Wahed Fund costs – there are the same so I won’t analyse these.
total over 5 years: £156
So on test 2 Wahed also passes.
However, do note that if you are a high net worth and looking to invest in excess of £250,000, this whole analysis needs to be rerun, because then, the transaction fees (which is where Wahed steams ahead of others at smaller scales) will make up a relatively small percentage as it will stay fixed for Hargreaves at £12 but go up for Wahed as it is a percentage amount. So numerically, £120 is a tiny fraction of £1m, while it is a large fraction of £100. However 0.05% of £1m is £500 – which is what the Wahed amount would be.
Can I open an account with just £100?
In short, not really – however I do caveat that I have only analysed for two big brokers. I am sure there will be others (though not sharia-compliant) who will allow you to invest for less.
The minimum amount to open an HL Fund and Share Account is just £1, however the minimum lump sum investment into a fund is £100. Direct Debits can be set up from as little as £25 per investment per month. So if you want to invest in 5 funds, you’ll be looking at a minimum starting amount of £500.
For IG, there is a minimum investment of £500 for each portfolio you create. IG will not invest any funds into your portfolio until you have deposited at least £500.
Does the account automatically update/rebalance with competitors?
In short, yes.
Both IG and Hargreaves have their own versions of managed portfolios. IG has its Smart Portfolio while Hargreaves has its Portfolio+.
There are a number of other investment managers who provide this service as well, so here Wahed is not unique.
How does the Wahed platform work?
I set up with Wahed pretty quickly and painlessly a few months back. Like any investment company Wahed need to run background checks on you once you have input your information and before you can deposit money with them. This took about a day or so, then I could invest. I, being a classic customer, took a while before I actually put in the money a few months later. In that time I received a couple of calls from the USA from Wahed’s head office, politely asking if I needed help and reminding me that I could invest whenever I wanted to. I thought this was quite a nice touch.
When I did get ready to put my money in, I was quite surprised to find that at the moment you have to make a bank transfer to Wahed, which for me took about 1-2 business days. I am sure Wahed will sort this out in the coming months – but that’s something that can definitely improve.
The other query that went through my mind was when I was asked to transfer to Wahed’s account, their bank details were listed on the website for me to use. Admittedly it looked like there was some strong encryption, but as a solicitor, I do get a bit nervous of hackers who could swoop in, change a few digits in the account number and my money ends up going elsewhere. But my money did ultimately end up in the right place and to be fair to Wahed, major brokers also list their account details if you want to make a bacs payment.
Once my money hit the Wahed account they sent me an email confirmation and said it would now take up to 5 business days before my money actually got invested. Again, this is not a big deal in the bigger picture, but I am used to large brokers who invest you into whatever you buy pretty much straight away. As Wahed grows, I can see this delay being reduced.
The actual back-end user interface for a logged-in customer is great. There’s a great big graph which shows you where your money is, and a breakdown of the fees, together with a monthly fee amount which is pretty easy to follow.
I tried to work out if I could set up a direct debit to automatically invest a certain amount every month – but unfortunately I couldn’t find the information easily.
UPDATE: Since this article was published Wahed have subsequently been in touch and helpfully explained that you can click on a link to set up a standing order on the page where you fund your account. They also added that an individual can set up multiple accounts under their name (e.g. for their children) – which is helpful to know. You could perhaps try out multiple strategies using different accounts.
- getting a personal call is a nice touch and you can talk through any queries you may have
- simple user interface which is relatively painless to use
- an ISA wrapper is great as it means you pay no tax on profits (as long as you don’t put more than £20k in a year)
- my money got to where it was meant to and the logged-in customer portal is really slick
- Getting calls from the USA can make one jumpy
- The inability to fund through debit/credit/Paypal and the subsequent delay that ensues
- The delay in getting my money invested into the portfolio itself
How best can I use Wahed?
Really this depends on you and your personal financial circumstances and investment goals.
For me, I like to do my own investment when it comes to stocks and shares, and Mohsin and I have been pretty successful alhamdulilah over the last few years (averaging over 20% per annum) so we’re happy to put in the time to do that.
So for me, giving my money to someone else to invest for me into a fund doesn’t seem that appealing. But for me, Wahed is still appealing because it gives me access to sukuk and global markets. Sukuk are not easily accessible and I want to have an element of fixed-income returns to my portfolio – so Wahed’s ultra-conservative portfolio is a good way of getting access to a good chunk of sukuk investment. Right now the ultra conservative portfolio is down – but that is a red herring as they would be down when equities are up, and will do better when equities go down. I have bought it as a hedge so can live with a relatively weaker performance.
Global equities I can get access to through my usual brokers, but global equities are a bit trickier to invest in when doing so in bulk. There are tax and regulatory regimes to grapple with and you may not be able to get easy access to those markets. So, again, a little bit of global equities through Wahed is a nice bonus.
But for most people I would imagine some of the other portfolios are also quite appealing, given their successful track record. Use our investment checklist to get started on thinking about what your investment objectives and risk appetite is – and remember to use this link to set up an account – it helps support our journalism!