Saturna Capital Chief Investment Officer Scott Klimo joined Steve Darling from Proactive to discuss the Islamic global equity ETF and its unique investment strategy. Saturna Capital, founded in 1989, became a pioneer in managing Islamic compliant assets in the United States. They recently expanded their offerings to include an ETF in Europe. Islamic investing involves both qualitative and quantitative criteria. Qualitatively, certain prohibited business activities, such as alcohol, pork, tobacco, and exploitative media, are avoided.
The primary restriction is on interest or usury, as mentioned in the Quran. Consequently, they do not invest in conventional financial activities like banks or insurance companies. Quantitatively, they prohibit excessive debt, defined as debt exceeding 33% of total market capitalization. This results in a portfolio with companies characterized by strong cash generation and robust balance sheets. The portfolio mainly includes technology, healthcare, industrials, and consumer staples/discretionary sectors. These sectors align with their criteria, offering strong balance sheets and stable cash flows. Saturna Capital's strategy traditionally provides attractive downside protection. Their low debt levels insulate them from rising interest rates, making their strategy favorable in the current environment. Saturna Capital's longstanding success stems from their commitment to Islamic-compliant investing and their ability to adapt to changing market conditions.