FAQs

Question

Can Shariah Passive Funds use derivatives?

Answer

The use of derivatives is generally restricted and permitted only during significant changes in the composition of the underlying index, such as during index rebalancing. In such situations, the fund may face practical challenges in buying or selling the required quantity of index stocks within a short period to accurately replicate the index structure. Therefore, derivatives may be used on a temporary basis solely to manage this transition period until the fund is able to complete the necessary portfolio adjustments.



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