Islamic Finance Daily Brief — Friday, October 23, 2026
Assalamu alaikum! Today's Islamic finance stories — and what to learn from them.
🇺🇸 1. Shariah indexes beat the market in Q3, and the reason is tech
S&P Dow Jones Indices published its third-quarter 2026 review on October 22. The S&P Global BMI Shariah rose 1.6%, beating the conventional S&P Global BMI by 0.5 percentage points. The Dow Jones Islamic Market World Index also gained 1.6%, beating the Dow Jones Global Index by 0.2 points. A heavy information technology allocation added 0.7 percentage points of excess return. In emerging markets and MENA, Shariah indexes lagged, because of sector weights and geopolitical tensions. Sukuk ended the quarter yielding 5.8% with a 72-basis-point spread, above conventional bonds.
What to learn: S&P Dow Jones Indices runs two versions of the same market: one plain index, one filtered by Shariah screens. The gap between them shows what the screens earn or cost in a given quarter. The screens remove banks, alcohol, gambling, and weapons companies, and they cap debt and interest income. What stays is a heavier mix of technology companies. In the third quarter, tech stocks led the market, so the screened index picked up the extra 0.7 points. The same mechanism explains the lag in emerging markets and MENA, where the screened indexes carry less weight in the sectors that drove those markets.
The Oct 6 edition (for more detail) taught how the screening works, and the Oct 20 edition taught that passive funds copy these indexes exactly. For a US investor, that connection is direct. The Shariah indexes sit inside the products many hold, such as the S&P 500 Shariah family behind funds like SPUS and HLAL. An ordinary investor in Dearborn whose 401(k) holds a Shariah-screened fund rode the same tech tailwind without ever reading the index report. The lesson runs both ways. A screen that keeps you out of banks pushes you deeper into tech. When tech rises, that helps. When tech falls, the same screen hurts. The outperformance is a side effect of the screens. It comes from the mix, not from anything extra the screens add.
🔗 Source: Seeking Alpha
Learn
Read the factsheet before you buy the fund
Every fund publishes a factsheet. It is a short document the fund company brings out every month with the fund's details: what the fund owns, what it charges — the charge is called the expense ratio — how closely the fund follows its index, and the mix of its investments across sectors and companies. This lesson takes SPUS, the SP Funds S&P 500 Sharia fund, as the example and explains those details in simple words. SPUS follows the S&P 500 Shariah Industry Exclusions Index, a screened list of about 200 US stocks (SPUS at SP Funds).
The first line is the sector mix. Technology companies make up about 60% of SPUS. Three companies — NVIDIA at 13.7%, Apple at 12.8%, and Microsoft at 10.1% — together make up about 37% of the whole fund (SPUS holdings). This is the same pattern behind today's first story. The screens remove banks and several other sectors. The money concentrates in tech, and the fund rises and falls with tech stocks.
The second line is the expense ratio, the fee the fund takes each year. SPUS charges 0.45% a year (AAII). A conventional S&P 500 fund such as SPY charges 0.09%. On $10,000 invested, SPUS takes about $45 a year and SPY takes about $9. The fee comes out of the fund's returns before the investor sees them.
The third line is the gap. The gap is the distance between what the index earned and what the fund earned in the same period. An index is a list of stocks with a set of rules. It pays no fees and no trading costs. A real fund pays both, so the fund ends a little behind its index. That shortfall is the gap.
The gap and the expense ratio are related, and they are different things. The expense ratio is a fee written in the fund's documents. It is set in advance, and it comes out every year. The gap is a result. It is measured after the period ends, and it covers the fee plus the fund's trading costs and the drag from cash that sits waiting to be invested. The fee is the biggest part of the gap. The gap is the full cost the investor actually bore.
SPY shows the pattern at the small end. SPY charges 0.09% a year. In a year when its index returns 10.00%, SPY ends near 9.88%. Its gap is about 0.12 points: the 0.09% fee, plus about 0.03 of trading and cash drag. A low fee keeps the gap low. SPUS charges 0.45%, so its gap starts larger.
To measure a fund's gap, open the performance table on its factsheet. Take the index return and the fund's NAV return for the same period. Subtract the fund return from the index return. The answer is the gap for that period.
Now the full calculation on a $10,000 investment, using the SPUS fee. The expense ratio is 0.45%. Suppose the fund's gap is 0.55% a year — the fee, plus 0.10 of trading and cash drag. Suppose the index returns 8% a year for three years.
- The index alone takes $10,000 to $12,597 in three years.
- The fee alone, at 0.45% a year, brings that to $12,440.
- The full gap, at 0.55% a year, brings it to $12,406.
The investor ends with $12,406. The gap cost $191 across the three years: $157 of it is the fee, and the rest is trading and cash drag. The fee tells an investor the largest part of the cost before investing. The gap tells the full cost after it has happened.
All sources
- Seeking Alpha — S&P DJI's Global Islamic Benchmarks Outperformed Conventional Peers in Q3 2026 (Oct 22, 2026)