Are “ethical" algorithmic actively-managed notes sharia-friendly?

I’ve been offered by my conventional non-Islamic bank in my Muslim country a “sharia-safe" loan subscription based on underlying value of long-short equity strategy in liquid stocks with up to 90% long and up to 10% short exposure (via derivatives)… automatically computer robo-traded. It has a commercial activities exclusion list that throws out sin-sectors.

Certification aside, how compatible is this security with the principles of Shari’a in your opinion? I’d really like it to be permissible (or at worst discouraged) but not if it’s haram.

Wa alaykum salaam,

It’s very difficult to comment on such investments without having thorough insight and understanding of what’s actually happening. If it has been reviewed and certified by a Shariah board, then you can consider it shariah compliant. If it has no Shariah advisor, then I would be very cautious in entering into such investments.

Thank you y’akhi, insightful. The bank certifies it itself from its own Shari’a board but the process is not transparent , you cannot know who is on the board or see the reasoning behind the decision, since it’s a purportedly Islamic product from a non-Islamic bank it isn’t independently certified by a known group. This is why it is good that Arab central banks are beginning to enforce adoption of AAOFI standards, albeit going slow. I know that binary options are not halal but unsure if all derivatives are not permissible