Franklin Templeton
Franklin Templeton already operates $3 billion in Sharia funds. But mixing Sharia-based investment principles with tech is a first for it. Image Credit: Bloomberg

Dubai: Mix Sharia-linked investments with high-tech? The US fund manager Franklin Templeton believes it can, launching its first Sharia-based technology fund. Holdings for the newly launched fund will become public next month, and will spread tech businesses in AI and ‘new commerce, as well as digital media transformation and the metaverse.

Fintech and digital payment entities will also be part of the fund’s coverage. “Companies must initially pass a business activities screen and an interest income screen, which limits income from prohibited activities to 5 per cent or less,” said Jonathan Curtis, Lead Portfolio Manager for the Franklin Shariah Technology Fund.

In the tech space, the Sharia-prohibited activities include the production/distribution of music, the production/distribution/screening of movies and television shows, defense and weapons manufacturers, and owning/operating casino and gaming facilities. Even with these off-limit activities, “Our investment universe consists of approximately 1,000 technology-related listed securities across the market capitalization spectrum,” said Curtis.

“We anticipate that the fund’s largest exposure will be within the large cap segment of the market followed by the mid-cap segment. By investing across the spectrum, we aim to provide investors access to a diverse range of companies across technology and related sectors with compelling long-term growth prospects.”

The investment space thus includes:

  • Communication and computing related outsourcing services;
  • Technology services, including computer software, data services, and Internet services;
  • Electronic technology, including computers, computer products, and electronic components;
  • Telecommunications, including networking, wireless, and wire-line services and equipment;
  • Media and information services, including the distribution of information and content providers;
  • Semiconductors and semiconductor equipment;
  • Medical technology;
  • Computing and communications infrastructure, and
  • Precision instruments.

Companies we believe are driving and benefiting from these trends include Microsoft, NVIDIA, Alphabet, and ServiceNow, just to name a few

- Jonathan Curtis

Of keen interest

Co-mingling the Sharia and technology investment space is still relatively untested waters. The Dubai-based fund manager Shuaa Capital has a portfolio of Sharia-compliant funds and also has extensive interests in the tech space, most notably its interest in the music streaming portal Anghami, which completed a listing on Nasdaq New York.

Franklin Templeton has over $3 billion in assets in its Shariah lines, which is led from its office in Dubai International Financial Centre. In addition, the firm offers dedicated Shariah investing expertise in Singapore and Malaysia.

We collaborated with our Shariah Supervisory Board to create a set of criteria that help identify businesses complying with Shariah principles to determine eligible investments.

- Sandeep Singh, Regional Head and Head - Islamic Business, Franklin Templeton.

“The screening criteria focus on prohibited business activities and applicable financial ratio tests,” said Singh.

The Franklin Templeton Equity Group had $145.2 billion in assets under management as of January end.