Mar 14 • 📊 Stock Screening
HLAL vs SPUS: the debt ratio debate — what it means for your portfolio
Something highlighted in r/HalalInvestor this week is worth a deeper look here.
A researcher ran HLAL (Wahed's halal ETF) through AAOIFI screening standards and found 22 holdings that fail — including AT&T, HPE, Pfizer, and others. This sounds alarming. Here's what's actually happening — and whether it should change anything for you.
THE CORE ISSUE: TWO DIFFERENT DEBT FORMULAS
The disagreement comes down almost entirely to one question: how do you measure a company's debt ratio?
AAOIFI method (SPUS / Zoya): Debt = Interest-bearing debt ÷ Market capitalisation < 33%
FTSE Russell method (HLAL): Debt = Interest-bearing debt ÷ Total assets < 33%
Same debt. Different denominator. Often, opposite verdict.
THE AT&T EXAMPLE
AT&T has $136B in interest-bearing debt.
- Market cap: $201B → AAOIFI ratio: 67.8% → FAILS
- Total assets: $420B (includes $197B in spectrum licenses) → FTSE ratio: 32.4% → PASSES
18 of the 22 divergences trace to this formula difference. The other 4 failed on business activity (gaming content, conventional financing arms).
WHY THE FORMULAS DIFFER
AAOIFI uses market cap because it's more conservative — asks: what fraction of your investment is backed by interest-bearing debt?
FTSE uses total assets because it's more stable — doesn't swing with daily stock prices, focuses on the company's actual balance sheet.
Both approaches have been reviewed and accepted by Islamic scholars. This is a legitimate difference of ijtihad (scholarly judgment).
WHAT THIS MEANS FOR YOU
1. HLAL holders: You are investing within a legitimate, scholar-approved framework. FTSE methodology is not haram — it's a different scholarly position on the debt formula.
2. If you prefer strictest AAOIFI standards: SPUS or Zoya-screened stocks are your route.
3. The transparency lesson: "Shariah-compliant" is not binary. It means the fund follows a specific methodology. Knowing which one matters.
4. Practical performance: Historically, return differences between SPUS and HLAL have been small. This debate affects borderline companies — not banks, alcohol, or weapons.
MY TAKE
Strictest standard → SPUS (AAOIFI via market cap)
More stable methodology → HLAL (FTSE via total assets)
Global investors (UK/EU) → HIWS and MWIM use total-assets approach similar to FTSE
Whatever fund you hold, understanding which debt formula it uses is part of knowing what you actually own.
Which fund do you hold — SPUS, HLAL, HIWS, MWIM? And does this kind of screening detail affect your choice?
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HLAL vs SPUS: the debt ratio debate — what it means for your portfolio
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