Halal ETF Funds 2026: SPUS, HLAL, ISDW & SPSK Compared (Fees + Purification)

Last updated: July 2026

Source: SP Funds

Halal ETF funds have grown into a mature asset class that no Muslim investor can afford to ignore. The flagship product, SPUS, crossed $2.07 billion in assets under management in mid-2026, while the sukuk ETF SPSK saw its expense ratio drop from 0.79% to 0.50% alongside a compelling 4.41% yield. Yet most guides still stop at listing ticker names and expense ratios, skipping the single most important step that keeps your returns compliant: purification.

This guide fills that gap. We explain how to verify Sharia compliance, walk through AAOIFI screening standards, compare the major funds with updated July 2026 data, and provide a worked purification example with real numbers.

The short answer: Halal ETFs are exchange-traded funds that invest only in companies passing dual Sharia screening (business activity and financial ratios). The leading funds in 2026 are SPUS ($2.07B AUM, 0.45% expense), HLAL, ISDW, and SPSK (sukuk, 4.41% yield). Every investor must calculate and donate a small annual purification percentage from dividends to keep returns clean.

This is an educational guide, not a fatwa or personalized financial advice. Always confirm your specific choices with a qualified Sharia board and verify fund details with your broker.

What Makes an ETF Halal

An exchange-traded fund (ETF) is a single tradable security holding many underlying stocks. A halal ETF holds only companies that pass two layers of Sharia screening.

Layer 1: Business Activity Screening

The fund excludes companies whose core business involves impermissible activities: conventional interest-based banking, traditional insurance, alcohol, gambling, tobacco, weapons, pork products, and adult entertainment. If a company earns its revenue from forbidden activity, it is excluded regardless of profitability.

Layer 2: Financial Ratio Screening

Even a company with acceptable business activities can fail if its balance sheet relies too heavily on interest-bearing debt. Under widely used AAOIFI standards, a company's interest-bearing debt should stay below approximately 30% of its market capitalization, interest-based investments below a similar threshold, and impermissible income below approximately 5% of total revenue.

The crucial point: a fund being labeled Islamic or Sharia is not proof of compliance. What matters is the screening methodology behind it and the Sharia board supervising it. Always verify, never assume.

Critical 2026 Updates: What Changed in Fund Numbers

Live data was reviewed from official sources (sp-funds.com, iShares, Wahed) on July 4, 2026. Several figures in previously published articles were outdated.

SPUS (SP Funds S&P 500 Shariah Industry Exclusions ETF):
- AUM: Increased from $1.9B to $2,066.86 million ($2.07B)
- Expense ratio: Decreased from 0.49% to 0.45%
- 30-day SEC yield: 0.43% (as of June 30, 2026)
- Inception date: December 17, 2019
- MSCI ESG Rating: A (score 6.79/10)
- Tracks approximately 200 stocks from the S&P 500

SPSK (SP Funds Dow Jones Global Sukuk ETF):
- AUM: Increased from $451M to $455.66 million
- Expense ratio: Major reduction from 0.79% to 0.50%
- 30-day SEC yield: 4.41% (as of March 31, 2026)
- Inception date: December 27, 2019

HLAL (Wahed FTSE USA Shariah ETF):
- AUM: Approximately $721 million (as of available data)
- Expense ratio: 0.50% (stable)

ISDW / ISWD (iShares MSCI World Islamic):
- AUM: Approximately $955 million (based on available historical data)
- Expense ratio: 0.30% (lowest among major halal ETFs)

The SP Funds family alone now manages over $2.53 billion (SPUS + SPSK combined). The total halal equity ETF market globally exceeds $4 billion, a significant increase from two years ago. The reduction in SPSK's expense ratio from 0.79% to 0.50% reflects market maturation and competition, directly benefiting long-term compliant investors.

Source: AAOIFI

Step-by-Step Guide to Choosing and Investing

Step 1: Verify the Screening Methodology

Read the fund's prospectus and look for reliance on a recognized standard such as AAOIFI, Dow Jones Islamic Market, S&P Shariah, or FTSE Shariah. An absent or vague methodology is an immediate red flag.

Step 2: Confirm the Sharia Supervisory Board

A reputable fund publishes its board members by name with their academic backgrounds and other scholarly affiliations. If you cannot identify the scholars overseeing the fund, treat the halal label with caution.

Step 3: Check the Published Purification Rate

Serious funds publish an annual purification percentage representing the small impermissible income share in their distributions. If a fund does not publish this figure, ask why.

Step 4: Compare Expense Ratios

Annual fees compound and erode returns over time. A 0.20% difference between two similar funds (e.g., 0.50% vs 0.30%) on a $100,000 investment over 20 years amounts to more than $8,000 in cumulative fees.

Step 5: Choose Your Access Route

Gulf-based investors have two main options: international brokerage platforms for US-listed funds (SPUS, HLAL, ISDW) or the Saudi Tadawul exchange for locally listed Sharia-compliant funds denominated in riyals.

Step 6: Invest Regularly and Track Dividends

Record every dividend payment in a simple spreadsheet: date, amount, and fund. This forms the basis for your annual purification calculation.

Step 7: Purify Your Income Annually

Calculate and donate the purification amount from your dividends. Without this step, your investment remains incomplete regardless of how well-screened the fund is.

2026 Comparison Table: Fees, AUM, and Yields

Important note: SPSK is not an equity fund but a sukuk fund, meaning it is a compliant income instrument based on real asset ownership rather than interest-bearing bonds. Its 4.41% yield makes it a compelling Sharia-compliant alternative to conventional fixed-income products.

The Purification Calculator: A Worked Example with Real Numbers

This is the section that no major competitor offers. Purification is the process of donating the small impermissible portion of your dividends to charity, without the intention of earning spiritual reward. Its purpose is to cleanse your capital of income that does not meet Sharia standards.

Ahmed, a software engineer in Riyadh, started investing in SPUS in early 2025. Like most beginners, he focused on expense ratios and ignored purification entirely during his first year because no guide he read mentioned it.

When he learned about it, he did the math. Over the year, SPUS paid him approximately $500 in dividends. The fund's published purification rate was approximately 1.4%.

Calculation: $500 x 1.4% = $7

Ahmed donated the $7 to a local charity without expecting spiritual reward, since the purpose is to remove the tainted portion rather than to earn merit. He then created a simple spreadsheet to track dividends going forward.

A larger example: if Ahmed's portfolio had grown to generate $5,000 in annual dividends, the calculation would be $5,000 x 1.4% = $70. The amount remains relatively small but the discipline is what matters.

The universal formula: Total dividends received x fund's published purification percentage = amount to donate.

SPUS vs HLAL: Holdings Overlap and Divergence

Many investors assume SPUS and HLAL are identical because both screen US equities. They actually follow different screening methodologies and produce partially different portfolios.

SPUS tracks the S&P 500 Shariah index, selecting approximately 200 compliant stocks from the full S&P 500 universe. Its larger size ($2.07B vs $721M) means higher trading liquidity and typically tighter bid-ask spreads.

HLAL (Wahed) tracks the FTSE USA Shariah index, which applies slightly different financial ratio thresholds and may include or exclude different companies at the margin.

The practical implication: if you hold only SPUS, you have exposure to one screening methodology. Some investors diversify between both to cover two screening approaches, though the top-10 holdings overlap significantly. Be aware that overlap means you may unknowingly hold the same stock through two different funds.

On fees, SPUS at 0.45% has a slight edge over HLAL at 0.50%. Over 20 years on $100,000, this 0.05% difference amounts to approximately $2,000 in cumulative fee savings.

SPSK at 4.41% Yield: The Halal Bond Alternative

With global interest rate environments elevating sukuk yields since 2023, SPSK's current 30-day SEC yield of 4.41% (as of March 31, 2026) is a genuine attraction for halal investors seeking stable income.

Sukuk are Islamic financing instruments based on ownership of real assets and profit-sharing from those assets, not on interest-based lending. When you buy SPSK, you hold shares in a diversified portfolio of sovereign and corporate sukuk from multiple countries, all passing Sharia screening. This makes it a naturally compliant income tool with minimal purification requirements.

The expense ratio reduction from 0.79% to 0.50% (2026 update) means the gap between gross and net yield has narrowed significantly. On a $100,000 investment, this single fee reduction saves approximately $290 annually, compounding over 10-20 years into thousands of dollars.

Who benefits from SPSK? Investors approaching their capital needs timeline (shorter horizon), those wanting steadier income than volatile equities, and those looking to reduce overall portfolio volatility. Many Gulf investors combine SPUS or HLAL for long-term growth with SPSK for stability and income.

How to Verify Sharia Compliance: Five Concrete Steps

1. Identify the Sharia Board by Name

A reputable fund publishes its supervisory board members and their scholarly credentials. Search for recognized scholars in Islamic finance who also serve on other reputable boards.

2. Review the Published Screening Methodology

It should reference a recognized standard (AAOIFI, S&P Shariah, FTSE Shariah) with explicit thresholds: interest-bearing debt typically below 30% of market cap, impermissible income below 5% of revenue, and interest-based investments below approximately 33% of total assets.

3. Look for a Periodic Purification Report

Its existence is strong evidence of serious compliance commitment. A fund that takes Sharia seriously will tell you the impure income percentage so you can cleanse it.

4. Confirm Re-screening Frequency

Companies can change over time. A reputable fund re-screens at least quarterly and removes companies that drift outside compliance.

5. Consult an Independent Sharia Authority When in Doubt

If uncertainty remains, present the fund to a qualified scholar or board with no financial relationship to the fund.

Common Mistakes and How to Avoid Them

Mistake 1: Trusting the word Islamic in a fund name. Check the methodology and board, not the marketing label.

Mistake 2: Skipping purification entirely. Calculate and donate annually. Without this step, your investment remains incomplete.

Mistake 3: Confusing sukuk with conventional bonds. Sukuk represent ownership in real assets. Conventional bonds are interest-bearing debt. They are fundamentally different instruments.

Mistake 4: Ignoring expense ratios. A 0.29% difference between two funds (0.79% vs 0.50%) on $100,000 over 20 years equals more than $8,000 in extra fees, as demonstrated by the SPSK fee reduction.

Mistake 5: Concentrating in a single fund. Diversify across equities, sukuk, and potentially compliant real estate based on your goals.

Mistake 6: Forgetting currency risk. If your obligations are in riyals and you invest entirely in USD-denominated funds, you carry additional exchange-rate exposure.

Mistake 7: Using borrowed money to invest. Interest-based financing defeats the purpose of halal investing. Buy only with capital you own.

For investors routing international business revenue, understand how a UK company for non-resident owners interacts with investment planning, or explore US LLC structures for non-residents as potential investment vehicles.

Sample Compliant Portfolio Structure

This is educational only, not a recommendation. The purpose is to show how the pieces fit together.

A diversified compliant portfolio might combine three building blocks:

Growth component (compliant global equities): The largest allocation for long-horizon investors (50-60%), using funds like SPUS (0.45% fees) or HLAL (0.50%) for US exposure, or ISDW (0.30%) for broader global diversification.

Stability component (sukuk): Reduces portfolio volatility and provides steadier income (20-30%), using a sukuk fund like SPSK (4.41% yield) or local sovereign sukuk.

Optional diversifier (compliant real estate or gold): A small allocation (5-10%) to halal REITs or compliant gold funds for additional diversification, after confirming Sharia compliance.

The exact proportions depend on your age, goals, risk tolerance, and time horizon. A younger investor might weight heavily toward equities; someone closer to needing capital would increase sukuk allocation.

Gulf and Local Funds

For Gulf-based investors, local listings on Tadawul offer convenience, familiar regulation, and riyal denomination. Active providers include Chimera Capital, Albilad Capital, Alinma Investment, and ANB Investment, offering Sharia-compliant equity funds, sovereign sukuk funds, and halal REITs.

Critical caveat: Tickers, prices, fees, and fund availability change frequently. Do not act on any specific ticker from a blog without verifying with your broker and the fund provider. Apply the same five-step verification methodology to local funds as you would to international ones.

Frequently Asked Questions

What is the best halal ETF to invest in for 2026?

The most established halal equity ETF is SPUS with $2.07B in AUM, a 0.45% expense ratio, and approximately 200 compliant S&P 500 stocks. HLAL offers broad US exposure via FTSE USA Shariah. ISDW provides global diversification at the lowest cost (0.30%). SPSK is the leading sukuk fund for income at 4.41% yield. The best choice depends on your goals and time horizon.

How do I calculate purification on Islamic ETF dividends?

Multiply your total dividends received by the fund's published purification percentage. For example, $500 in SPUS dividends at a 1.4% rate equals $7 to donate. Do this annually without the intention of earning spiritual reward, as the purpose is to remove impermissible income.

SPUS vs HLAL: which is better for halal investing?

Both screen US equities. SPUS is larger ($2.07B vs $721M), cheaper (0.45% vs 0.50%), and tracks S&P 500 Shariah. HLAL follows FTSE USA Shariah from Wahed. The methodologies differ slightly in debt and income thresholds, producing similar but not identical holdings. Many investors hold one as their core US position.

Is ISDW (iShares MSCI World Islamic) AAOIFI compliant?

ISDW follows the MSCI Islamic methodology, which is a recognized global standard generally aligned with AAOIFI principles in business activity and financial ratio screening, though not identical in every detail. For specific compliance questions, consult a qualified Sharia board.

Can I invest in the S&P 500 in a Sharia-compliant way?

Yes. SPUS invests specifically in S&P 500 companies that pass Sharia screening under the S&P 500 Shariah methodology, holding approximately 200 out of 500 stocks. This provides compliant exposure to the broader US economy.

What are the expense ratios for Islamic ETFs?

Expense ratios range from 0.30% for ISDW (lowest cost) to 0.50% for HLAL and SPSK, and 0.45% for SPUS. SPSK's fee dropped from 0.79% to 0.50% in 2026. Compare carefully because fees compound: a 0.20% difference on $100,000 over 20 years equals more than $8,000.

Is SPSK (sukuk ETF) a halal alternative to bonds?

Yes. Sukuk are Islamic financing instruments based on ownership of real assets and profit-sharing, not interest-based lending like conventional bonds. SPSK invests in a diversified portfolio of compliant global sukuk, currently yielding 4.41% with a 0.50% expense ratio. Purification is minimal.

What percentage of dividends need purification in halal ETFs?

The percentage varies by fund and year, published in the fund's purification report. For SPUS, the rate has been approximately 1.4% as a historical average. The rate represents the impermissible income share and is typically small because screening excludes companies with significant non-compliant revenue.

Conclusion

Halal ETF funds in 2026 have reached a level of maturity that demands serious attention. SPUS alone manages $2.07 billion at a competitive 0.45% expense ratio. SPSK's fee dropped to 0.50% while offering a 4.41% yield. The market now offers genuine choice across equities, sukuk, and regional funds.

But owning the right fund is only the start. Verify each fund's screening methodology and Sharia board. Choose your balance between growth equities and stable sukuk. Above all, do not skip purification, the small annual cleansing step that keeps your returns genuinely clean. Invest only with capital you own, never with interest-based credit.

This guide is educational, not a fatwa. Confirm your specific decisions with a qualified Sharia board and verify all fund details with your broker.

Sources

• SP Funds - SPUS Official Page - AUM, fees, and yield data verified July 2026
• SP Funds - SPSK Official Page - Sukuk ETF data
• AAOIFI - Accounting and Auditing Organization for Islamic Financial Institutions
• Wahed Funds - HLAL
• iShares - Islamic Index Funds

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