The $390m iShares MSCI World Islamic UCITS ETF previously used a non-replicating investment strategy, meaning it aimed to track the benchmark, while not being required to match it exactly.
However, Microsoft was added to the fund’s benchmark – the MSCI World Islamic index – on 1 December. It had been previously excluded due to financial ratio screens in the methodology of the index.
After doing so, the firm became 13% of the index, in excess of the 10% limit imposed by a non-replicating strategy.
This meant the fund was unable to hold the full weighting of the index, leading to an increased tracking error against it.
Therefore, on 11 January, the fund switched to using a replicating investment strategy, meaning it now seeks to replicate the constituents of the index by holding all the securities in it with similar proportions, with a 20% limit.
BlackRock said that there were not expected to be any costs for changing the investment strategy.
