Product Disclosure Statement

Version: 19 May 2020


Wahed Technologies Sdn. Bhd. (formerly known as Wahed Robo Advisors Sdn. Bhd.) (“Wahed” or the “Firm”) is a subsidiary of Wahed Inc., the first automated Shariah compliant wealth adviser in the world. It aims to provide low-cost, ethical, and diversified portfolio solutions to Muslim and ethical investors across the globe. Wahed’s proprietary technology has been designed and developed for ease of use, accessibility, and global scalability. Wahed has identified great market potential of its platform; given that its investors are increasingly seeking transparency and ethical investment opportunities. Wahed operates in the Financial Technology (FinTech) space, where operations are highly dependent on technology infrastructure and algorithms to assign proper portfolio allocation weight and drive profit.


The Firm offers an automated investment management service, providing maximum net-of-fee, investment returns against client’s individual risk tolerance profile. The Firm will target investors that require Shariah compliant instruments in which to invest. The Firm will begin offering its services in Malaysia at a minimum investment of RM 100. We will be offering a range of portfolios with varying target returns. Each portfolio invests across multi-asset classes to maximize diversification benefits. All securities used in the portfolio selection process are periodically reviewed by the firm’s investment committee, investment professionals and periodically monitored by its Shariah review board.

The Firm will leverage its technological and operational capabilities to offer its clients lower fees and a wide scope of investment benefits. Its investment philosophy has allowed the firm to target a wide range of investors, in addition to high net worth individuals and corporates. The firm’s Shariah review board will be responsible for ensuring that all securities that are being considered are compliant with Islamic principles.


The Firm carries out its fund management activities in accordance with the Shariah Principle of Wakalah. The Firm (wakil) shall be appointed as the agent of the Client (Muwakkil) to carry out investment related activities on behalf of the Client.


a) Digital business model

The Firm brings to the market a digital investment solution that allows the average Malaysian to invest confidently in Shariah compliant securities at a more affordable cost and with a lot more convenience.

Without any upfront sales charge, a low fee starting from 0.79% and the convenience of signing up, investments monitoring, free deposits and withdrawals all done online, we save investors hours of their precious time and, most importantly, reduce the costs that they would normally have to pay in other investment alternatives. We also do not have any lock-in periods — deposits and withdrawals can be done at any time.

b) Digital business model

The user is at the core of our service. Our web application is specifically designed with our users in mind. Also, we do extensive user tests internally where select team members will use the app on a daily basis, collate feedback and improve the applications accordingly. We spend 1-3 months in testing within closed groups before launching any application.

The Firm also values transparency. We offer full disclosures on our website and all relevant client related documents are made publicly available on our home page.

The In addition, we see the need to continue to educate the public on Islamic finance and Islamic investing. Hence, we have started creating content in collaboration with world-renowned scholars. We will continue doing this and eventually consolidating these contents on our own ‘Knowledge Hub’ which will be made publicly available on our website. The Firm will also be engaging Malaysian scholars to co-create content in Bahasa Malay to educate the public on the benefits of Islamic finance.

(c) Automated investment proposition

On the Firm’s digital platform, the investor begins by responding to several risk-related questions. The initial queries focus on investment goals, liquidity needs, and time horizon and risk comfort levels. Using modern portfolio theory, the Firm’s approach optimizes the investor’s portfolio with Shariah-compliant investments offering the greatest returns for the minimum amount of risk.

The broad investment categories include global equity, emerging markets equity, Malaysian equity, REITs, commodities and fixed income. Using investments from these categories, the investors' percentages in specific asset classes are determined according to their risk category. The risk categories are:

For example, a very conservative portfolio would own 15% equity, 72.5% fixed income, 5% gold, 5% REIT and 2.5% cash.

As a digital investment management company or robo-advisor, the Firm will also rebalance its clients’ portfolios. The frequency of rebalancing is determined by several factors. If the investor’s goals or risk profile changes, the portfolio will be rebalanced. The assets will be rebalanced when funds are added to or withdrawn from the account. A major change in market volatility might spur rebalancing. The portfolio may also be rebalanced if there’s a great deviation from the consumers expected return.


The Firm employs modern portfolio theory (MPT) to identify the optimal portfolio for each client. Harry Markowitz and William Sharpe introduced MPT, for which they won the Nobel Prize in 1990. At present, MPT is the most widely accepted framework for managing diversified investment portfolios. However, the theory is not free of limitations, especially in the area of extremely low probability significant downside scenarios.

It has been observed that returns can be maximized across risk levels by combining different asset classes instead of individual securities. The Firm first identifies a broad set of diversified asset classes to serve as a portfolio’s building blocks.

Each asset class is evaluated on long-term historical behavior in different economic scenarios, risk-return profiles conceptualized in asset pricing theories, and their expected behavior on the basis of long-term secular trends and the macroeconomic environment. It is further evaluated on the following:

The investment management team of the Firm has designed a service to provide each client a unique portfolio that is diversified across relatively uncorrelated asset classes and customized for individual risk tolerance.

The firm invests with an equity orientation to maximize long-term returns. The Firm regularly monitors and periodically rebalances portfolios to increase long-term investment returns.

For additional information on securities selection, please refer to the “Investment Methodology White Paper” In Appendix A.


Each asset class is represented by a low-cost Shariah compliant Exchange Traded Fund (ETF) or group of select securities. On the unavailability of such an ETF, a security, a fund, or an instrument is selected to mimic the profile of the asset class in question. The following table shows the list of asset classes and their corresponding securities that have been selected for investment purposes.

Asset Class Description
U.S. Equity The U.S. exposure covers the total U.S. market and measures the performance of all large and mid- cap stocks that comply with Islamic principles. This asset class helps investors participate in the long-term growth of the U.S. market.
Malaysian Equity The Malaysian exposure aims to offer capital growth over the medium to long term by closely mirroring the performance of above average dividend-yielding Shariah stocks. This allows investors to participate in the growth of the Malaysian market by tracking local counters that have sustainable dividend, good fundamentals and solid recent price performance.
Malaysian Sukuk The essence of Sukuk is to provide ethical compliant instruments for investments which do not involve interest and excess uncertainty. It is a primacy of equity financing. The Sukuk holder has an ownership on the underlying asset which is entitled for revenues generated from the Sukuk asset unlike the bondholder who is eligible to receive interest payments by the bond issuer. It must be asset backed or asset based and interest free.
Gold Commodities as an asset class have had historically low correlation with stocks and bonds. Currently we have only included gold to represent this asset class. Gold provides the potential for long-term capital appreciation as well as acting as an inflation hedge.


All investments carry risk. The likely investment return and the risk of losing money is different for each asset class as different strategies carry different levels of risk depending on the underlying mix of assets. Those assets with potentially the highest long-term return (such as shares) may also have the highest risk of losing money in the shorter term.

The significant risks are as follows:

Political Risks.

Most investments have a global component, even domestic stocks. Political events anywhere in the world may have unforeseen consequences to markets around the world.

Foreign Investing and Emerging Markets Risk.

Foreign investing involves risks not typically associated with Malaysian investments, and the risks may be exacerbated further in emerging market countries. These risks may include, among others, adverse fluctuations in foreign currency values, as well as adverse political, social and economic developments affecting one or more foreign countries. In addition, foreign investing may involve less publicly available information and more volatile or less liquid securities markets, particularly in markets that trade a small number of securities, have unstable governments, or involve limited industry. Investments in foreign countries could be affected by factors not present in Malaysia, such as restrictions on receiving the investment proceeds from a foreign country, foreign tax laws or tax withholding requirements, unique trade clearance or settlement procedures, and potential difficulties in enforcing contractual obligations or other legal rules that jeopardize shareholder protection. Foreign accounting may be less transparent than Malaysian accounting practices and foreign regulation may be inadequate or irregular.

General Market Risks.

Markets can, as a whole, go up or down on various news releases or for no understandable reason at all. This sometimes means that the price of specific securities could go up or down without real reason, and may take some time to recover any lost value. Adding additional securities does not help to minimize this risk since all securities may be affected by market fluctuations.

Currency Risk.

Overseas investments are subject to fluctuations in the value of the dollar against the currency of the investment’s originating country. This is also referred to as exchange rate risk.

Regulatory Risk.

Changes in laws and regulations from any government can change the value of a given company and its accompanying securities. Certain industries are more susceptible to government regulation. Changes in zoning, tax structure or laws impact the return on these investments.

Tax Risks Related to Short Term Trading.

Clients should note that Wahed may engage in short-term trading transactions. These transactions may result in short term gains or losses for tax purposes, which may be taxed at a higher rate than long term strategies. Wahed endeavors to invest client assets in a tax efficient manner, but all clients are advised to consult with their tax professionals regarding the transactions in client accounts.

Risks Related to Investment Term.

If you require us to liquidate your portfolio during a period in which the price of the security is low, you will not realize as much value as you would have had the investment had the opportunity to regain its value, as investments frequently do, or had we been able to reinvest in another security.

Purchasing Power Risk.

Purchasing power risk is the risk that your investment’s value will decline as the price of goods rises (inflation). The investment’s value itself does not decline, but its relative value does, which is the same thing. Inflation can happen for a variety of complex reasons, including a growing economy and a rising money supply.

Business Risk.

These risks are associated with a particular industry or a particular company within an industry. For example, oil-drilling companies depend on finding oil and then refining it, a lengthy process, before they can generate a profit. They carry a higher risk of profitability than an electric company, which generates its income from a steady stream of customers who buy electricity no matter what the economic environment is like.

Liquidity Risk:

Liquidity is the ability to readily convert an investment into cash. For example, Treasury Bills are highly liquid, while real estate properties are not. Some securities are highly liquid while others are highly illiquid. Illiquid investments carry more risk because it can be difficult to sell them.

Financial Risk.

Excessive borrowing to finance a business’ operations decreases the risk of profitability, because the company must meet the terms of its obligations in good times and bad. During periods of financial stress, the inability to meet loan obligations may result in bankruptcy and/or a declining market value.

Default Risk.

This risk pertains to the ability of a company to service their debt. Ratings provided by several rating services help to identify those companies with more risk. Obligations of the Malaysia government are said to be free of default risk.

Advisory Risk.

There is no guarantee that Wahed’s judgment, models, or investment decisions about particular securities or asset classes will necessarily produce the intended or expected results. Wahed’s judgment may prove to be incorrect, and a client might not achieve the client’s investment objectives. Wahed may also make future changes to the investing algorithms and services that it provides. In addition, it is possible that clients or Wahed itself may experience computer equipment failure, loss of internet access, viruses, or other events that may impair access to Wahed’s software-based or web-based service. Wahed and its representatives are not responsible to any client for losses unless caused by Wahed breaching a duty or breaching a contract.

Fund Risks, including Net Asset Valuations and Tracking Error.

Wahed expects to primarily recommend and make available through its Wrap Fee program exchange-listed securities, including ETFs and other funds.

ETF performance may not exactly match the performance of the index or market benchmark that the ETF is designed to track because (i) the ETF will incur expenses and transaction costs not incurred by any applicable index or market benchmark; (ii) certain securities comprising the index or market benchmark tracked by the ETF may, from time to time, temporarily be unavailable; and (iii) supply and demand in the market for either the ETF and/or for the securities held by the ETF may cause the ETF shares to trade at a premium or discount to the actual net asset value of the securities owned by the ETF. Certain ETF or other fund strategies may from time to time include the purchase of fixed income, commodities, foreign securities, American Depositary Receipts, or other securities for which expenses and commission rates could be higher than normally charged for exchange-traded equity securities, and for which market quotations or valuation may be limited or inaccurate.

Clients should be aware that to the extent they invest in ETF or other fund securities they will pay multiple levels of compensation – fees charged by Wahed plus any management fees charged by the issuer of the ETF or other fund. This scenario may cause a higher advisory cost (and potentially lower investment returns) than if a client purchased the ETF or other fund directly.

An ETF or other fund typically includes embedded expenses that may reduce the fund's net asset value, and therefore directly affect the fund's performance and indirectly affect a client’s portfolio performance or an index benchmark comparison. Expenses of the fund may include management fees, custodian fees, brokerage commissions, early redemption charges and legal and accounting fees. ETF and other fund expenses may change from time to time at the sole discretion of the issuer. ETF tracking error and expenses may vary.

Large Investment Risks.

Clients may collectively account for a large portion of the assets in certain investments. If many Accounts buy or sell some or all of a particular investment where clients hold a significant portion of that investment may negatively impact the value of that investment.
The foregoing list of risks does not purport to be a complete enumeration or explanation of the risks involved in investing in Investments. As Wahed’s investment strategies develop and change over time, clients may be subject to additional and different risk factors. No assurance can be made that profits will be achieved or that substantial losses will not be incurred.


The Firm focuses on providing customers access to Shariah compliant investments at affordable costs to ensure Muslim investors do not have any unnecessary financial burden.

The Firm’s customers are billed on the basis of the wrap fee structure concept. A wrap fee is a comprehensive charge levied by the Firm on customers against a bundle of services, including investment advice and research, and brokerage services. As a straightforward fee is charged, the payment process for both advisers and investors is simple.

Our wrap fee is charged on the basis of the level of assets under management (AUM) of each investors and averages at about 0.59% of AUM, one of the lowest wealth management fees charged by any Shariah compliant wealth advisor. Please find below the wrap fee structure:

Fee AUMs
0.79% MYR 100.00–499,999.00
0.39% MYR 500,000 +

The following table shows the revenue source and the respective charge:

Revenue Source Method of Revenue Generation Launch Stage Charge
Wrap Fee Charged monthly based on client AUM 1 0.39–0.79%

The Firm is a “fee only” investment adviser. The firm will not receive or accept any other direct or indirect compensation. This ensures complete transparency for clients.


The U.S Equity Asset Class is represented by Wahed FTSE USA Shariah ETF (HLAL), a Nasdaq listed ETF managed by our affiliate company, Wahed Invest LLC (“Wahed Invest”) using a “passive management” (or indexing) approach to seek to track the total return performance, before fees and expenses. Due diligence was conducted by Wahed Invest to ensure that the structure, investment and operations of HLAL meets the requirements of Nasdaq. Please note that there are no direct transactions between the Firm and Wahed Invest involved in the acquisition of HLAL and all transactions are conducted on arm's length basis where the Firm will buy and sell HLAL’s shares through third-party brokers at market prices. HLAL offers clients diversification into Shariah compliant US stocks. However, diversification does not assure profit nor protect against loss in a declining market. Past performance is not a guarantee of future results and as with all investments, HLAL includes some risk, including the possibility of loss of principal. Investors are advised to read and understand HLAL’s Prospectus, Supplementary Prospectus and Factsheet to carefully consider the investment objectives, risks, charges, and expenses in relation to HLAL. All the aforementioned documents may be found at HLAL’s website,

APPENDIX A: Investment Methodology White Paper

Our investment methodology employs five steps:

1. Identify an ideal set of asset classes for the current investment environment

2. Select low cost ETFs and/or securities to represent each asset class

3. Determine your risk tolerance to create the appropriate portfolio for you

4. Apply Modern Portfolio Theory to allocate among the chosen asset classes for your risk tolerance

5. Monitor and periodically rebalance your portfolio

Finding Asset Classes

The first step in our methodology is to identify a broad set of diversified asset classes to serve as the building blocks for our portfolios. We consider each asset class’s long-term historical behaviour in different economic scenarios, risk- return relationship conceptualized in asset pricing theories, and expected behaviour going forward based on long-term secular trends and the macroeconomic environment. We also evaluate each asset class on its potential for capital growth and income generation, volatility, correlation with the other asset classes (diversification), inflation protection, and cost to implement via ETF and tax efficiency.

Asset classes fall under three broad categories: stocks, bonds (Sukuk) and inflation assets. Stocks, despite their high volatility, give investors exposure to economic growth and offer the opportunity for long-term capital gains. Stocks provide effective long-run inflation protection and are relatively tax efficient due to the favourable tax treatment on long-term capital gains and stock dividends (relative to the way ordinary income is taxed).

Bonds (Sukuk) and bond- like securities are the most important income-producing asset classes for income- seeking investors. Although bonds have lower return expectations, they provide a cushion for stock-heavy portfolios during economic turbulence due to their low volatility and low correlation with stocks. Assets that protect investors from inflation in both moderate and high inflation environments include Real Estate and Commodities. Their prices tend to be highly correlated with inflation.

Based on a thorough analysis, our investment team currently works with the asset classes listed in the table below.

Asset Benefits
Malaysian Equity Capital growth, long-run inflation protection, tax efficiency
U.S. Equity Capital growth, long-run inflation protection, tax efficiency
Malaysian Sukuk Income, low historical volatility, diversification
Gold Diversification, inflation protection

Allocating Assets

Mean-Variance Optimization

The Firm determines the optimal mix of our chosen asset classes by solving the “Efficient Frontier” using Mean-Variance Optimization (MVO) (Markowitz, 1952), the foundation of Modern Portfolio Theory. The Efficient Frontier represents the portfolios that generate the maximum return for every level of risk. Each portfolio is created by choosing a particular mix of asset classes that maximizes the expected return for a specific level of risk, or equivalently, one that minimizes the risk for a specific expected return. MVO calculates the best risk-return trade-off when combining the asset classes in portfolios. In addition to portfolio construction, we also use MVO as an important quantitative tool to evaluate how many asset classes we should use in a portfolio. If adding an asset class to the mix raises the efficient frontier, then it improves the risk-return trade-off of the portfolios, (i.e. it offers a higher return for the same risk level or lower risk for the same return level). MVO provides a powerful mathematical framework for evaluating portfolio risk-return trade-offs. As you will see later in this paper, we also apply other quantitative approaches and qualitative assessment when choosing portfolios to manage.

Capital Market Assumptions

MVO requires, as inputs, estimates for each asset class’s standard deviation, correlation and expected return. To estimate each asset class’s standard deviation (volatility), we consider its long-term historical standard deviation, its short-term standard deviation, and the expected volatility implied by its pricing in the options markets. Long-term historical estimates benefit from a larger sample size, short-term estimates capture market evolution and the option markets imply forward-looking volatility. To estimate correlation, we consider long-term historical correlation and short-term correlation.

To estimate each asset class expected return, we start with the Capital Asset Pricing Model (CAPM) (Sharpe, 1964) as the baseline estimate. CAPM derives expected returns in market equilibrium under certain assumptions, and states that the expected return of an asset class is dictated by its systematic risk as measured by beta. Riskier asset classes command higher expected returns. Both MVO and CAPM are important constituents of Modern Portfolio Theory (MPT). We also form views on long-term return expectations for each asset class based on interest rates, credit spreads, dividend yields, GDP growth and other macroeconomic variables. We use the Black-Litterman model (Black & Litterman, 1992) and the Gordon growth model (Gordon, 1959) to adjust the CAPM returns with our views. We subtract ETF expenses from the gross return of each asset class to estimate its net-of-fee expected return.

We update our estimates annually which likely results in small changes to our recommended asset allocations. Existing clients’ portfolios are rebalanced to account for the new estimates if the changes in estimates lead a particular asset class percentage to fall outside the thresholds described in the rebalancing section below.

Portfolio Constraints

In addition to estimating parameters carefully for MVO, we enforce minimum and maximum allocation constraints for each asset class. This method is widely used to ensure proper portfolio diversification, mitigate parameter estimation errors and express investor preferences.

Investment Types

The Firm uses cost-effective, index-based Exchange Traded Funds (ETFs) to represent each asset class. In contrast, many financial advisors have historically recommended actively managed mutual funds. Mutual funds were convenient because they could be chosen easily using a well-known rating system offered by Morningstar. In 2010, Morningstar admitted its rating system did not successfully identify mutual funds that could outperform the market in the future (Kinnel, 2010). Not surprisingly, a significant amount of research has been published that shows the majority of mutual funds (65-75%) underperform the market (Bogle, 2009; Malkiel, 2012) and those that outperform in one period are unlikely to outperform in subsequent periods. A widely cited paper on the subject showed mutual funds underperformed the Vanguard S&P 500® index fund by an average of 2.1% per year pre-tax over a 20-year period due to high fees and poor stock selection (Arnott, Berkin, & Ye, 2000).

The Firm periodically reviews the entire population of Shariah compliant ETFs to identify the most appropriate ones to represent each of its four recommended asset classes. We look for ETFs that minimize cost and tracking error, offer ample market liquidity, and adhere to Islamic standards.

If such an ETF is not available, a security, fund, or instrument is chosen to mimic the profile of the asset class in question.

Determining Your Risk

Rather than asking the typical 25 questions asked by financial advisors to identify an individual’s risk tolerance, the Firm combed behavioral economics research to simplify our risk identification process to only a few questions. For example, we are able to project an individual’s income growth and saving rate based on individual’s age and current income. We ask prospective clients questions to evaluate both their objective capacity to take risk and subjective willingness to take risk. Our view is that sophisticated algorithms can do a better job of evaluating risk than the average traditional advisor.

We ask subjective risk questions to determine both the level of risk an individual is willing to take and the consistency among individual’s answers. The less consistent the answers, the exponentially less risk tolerant the investor is likely to be. For example, if an individual is willing to take a lot of risk in one case and very little in another, then the individual is inconsistent and is therefore assigned a lower risk tolerance score than the simple weighted average of individual’s answers.

We ask objective risk questions to estimate with as few questions as possible whether the individual is likely to have enough money saved at retirement to afford individual’s likely spending needs. The greater the excess income, the more risk the customer is able to take. Conversely if individual’s expected retirement income is less than individual’s likely retirement spending needs, then she cannot afford to take much risk with individual’s investments.

We email our clients quarterly to determine if anything in their financial profile has changed that may affect their risk tolerance. For example, getting married, having kids, or being promoted to a significantly higher paying job can have a major impact on the risk score we apply and therefore one’s ideal investment mix. In addition we gradually adjust clients’ investment mixes as they age to make sure they have less volatility as their retirement approaches.

We allow clients to adjust their assigned risk score once every 30 days, in the event they want a more or less conservative allocation based on their individual circumstances. We warn them in advance that it might not be appropriate for their ultimate goals. We restrict the risk score to be changed only once every 30 days as we don’t believe it should be used as a market timing tool. We also may limit the number of times a client can change individual’s risk score in order to further discourage attempts to time the market. The Firm discourages market timing because we believe attempting to time the market is one of the most serious mistakes an individual investor can make.

Rebalancing and On-going Monitoring

A portfolio created using MPT-based techniques will not stay optimized over time. The composition of any investment portfolio will naturally drift as capital markets move and certain holdings outperform others. This typically results in two adverse outcomes: (1) portfolio risk increases as the equity portion of the portfolio grows beyond its original allocation, and (2) allocations become sub-optimally mixed. To maintain the intended risk level and asset allocations, a portfolio must be periodically rebalanced back to its original targets.

We consider the volatility associated with each of our chosen asset classes when deciding when and how to rebalance. We do not consider the tax implications.

We continually monitor client portfolios as our platform is engineered to alert our investment management team when any portfolio steps outside its assigned standard deviation and/or assigned optimal asset allocation mix.


The Firm combines the judgment of its world-class optimization team with state-of-the-art optimization tools to identify efficient portfolios. We strive to deliver the maximum net-of-fee, after-tax, real investment return for each client’s particular tolerance for risk. This means we will continue to look for meaningful ways to improve our investment methodology in the future while continuously monitoring and periodically rebalancing our clients’ portfolios to maximize returns while maintaining their calculated risk tolerance. We believe following this process will lead to outstanding long-term financial outcomes for our clients.