If You Invested in KraneShares Wahed Alternative Income Index ETF (KWIN)

The KraneShares Wahed Alternative Income Index ETF (KWIN) is an exchange-traded fund listed on the NYSE that seeks to provide a Shariah-compliant approach to alternative income. According to its sponsors, the fund is designed for faith-aligned investors who want exposure to income-generating strategies that adhere to Islamic principles, while aiming to reduce reliance on traditional interest-based fixed-income securities.

Investment objective and index

KWIN seeks to track the performance of the Wahed Shariah Alternative Income Index. This index is constructed to comply with Islamic principles as interpreted by Wahed’s Shariah team, while targeting an alternative income profile. The fund’s strategy focuses on generating returns through Shariah-compliant forward sale agreements rather than conventional interest-bearing instruments.

The structure is intended to pursue alternative income while mitigating exposure to equity market risk. The forward sale agreements are implemented using a combination of exchange-traded FLEX contracts on Shariah-compliant stocks. The strategy is designed to provide a delta-neutral outcome, meaning that small changes in the price of the underlying stocks are intended to have minimal impact on the fund’s overall value, although risks remain and losses are still possible.

Shariah-compliant alternative to Sukuk

The sponsors describe KWIN as an alternative for investors who might otherwise look to Sukuk as their primary fixed-income-style exposure. While Sukuk play an important role in Islamic finance, they can be illiquid, exhibit elevated price volatility, and be exposed to sovereign or corporate credit risk. KWIN is engineered as a Shariah-compliant alternative income strategy that uses an ETF format to provide daily tradability and access to exchange-traded derivatives on screened equities.

Use of forward sale agreements and options

The fund’s approach involves writing call options and buying put options as part of its strategy, implemented through FLEX options on Shariah-compliant stocks. These options-based forward sale agreements are intended to support the fund’s income profile and its delta-neutral design. However, the use of options introduces specific risks, including the possibility that options may become illiquid, expire worthless, or fail to offset declines in the underlying securities. The value of the fund’s options positions will fluctuate with changes in the value and volatility of the underlying securities and broader market conditions.

Because the strategy uses derivatives, including futures or forward contracts, swaps, and options, the fund is exposed to derivative-related risks such as liquidity risk, counterparty risk, and the potential for magnified gains or losses. Transactions in options are centrally cleared through the Options Clearing Corporation (OCC), which introduces additional considerations related to clearing members and settlement.

Shariah screening methodology

The underlying index applies a two-step Shariah screening process to determine eligible holdings:

• Business Activity Screen – Excludes companies whose primary business involves non-permissible sectors under Islamic principles, such as conventional financial services (banks, insurance, interest-based lending), alcohol, pork products, tobacco, gambling, gaming, adult entertainment, weapons manufacturing, and other industries considered contrary to Islamic ethics.
• Financial Ratio Screen – Excludes companies with excessive debt or that derive more than a specified portion (more than 5%) of their revenue from non-permissible activities.

All portfolio holdings in the index are reviewed on a quarterly basis and monitored by Wahed’s Shariah team to help ensure ongoing compliance with these criteria. Because the index applies Islamic principles, the fund does not invest in certain issuers and securities, including financial companies and interest-paying bonds, which reduces the pool of eligible investments and may affect performance. The fund will not earn interest on cash, and securities may become non-compliant after purchase and be held until the index is rebalanced.

Target investors and positioning

KWIN is described as being created for investors who want to remain aligned with their faith while accessing alternative income-generating investment strategies. The sponsors highlight that the fund may appeal to Muslims and other values-based investors who seek halal, Shariah-compliant exposure and who prefer an ETF structure that offers exchange trading and daily liquidity. The strategy is also presented as a modern, efficient alternative to traditional Sukuk-based approaches, while acknowledging that it carries its own set of risks.

Risks and concentration

The fund’s materials emphasize that investing involves risk, including the possible loss of principal, and that there can be no assurance the fund will achieve its stated objectives. Because the index applies Shariah principles and focuses on a specific type of strategy, KWIN is described as a narrowly focused investment that may exhibit higher volatility. The fund’s assets are expected to be concentrated in a sector, industry, market, or group of concentrations to the extent the underlying index has such concentrations, which can increase sensitivity to adverse developments affecting those areas.

The fund is also characterized as non-diversified, which means it may invest a larger portion of its assets in a smaller number of issuers than a diversified fund. In addition, disclosures note that a large number of shares of the fund may be held by a single shareholder or a small group of shareholders, and redemptions from such shareholders could harm fund performance, especially in declining markets, by forcing sales at disadvantageous prices and increasing costs and potential tax effects for remaining shareholders.

Partnership between Wahed and KraneShares

KWIN reflects a collaboration between Wahed and KraneShares. Wahed is described as a global Islamic fintech company focused on democratizing access to Shariah-compliant investments, combining financial technology with Shariah principles and Shariah governance expertise. KraneShares is described as an investment manager focused on thematic, alternative, and non-traditional index-based strategies. Together, the two firms position KWIN as a Shariah-compliant alternative income ETF that integrates Wahed’s Shariah framework and KraneShares’ experience in ETF-based strategies.

As with any ETF, investors are encouraged in the fund’s own materials to carefully consider investment objectives, risk factors, charges, and expenses, and to review the fund’s prospectus and summary prospectus for more detailed information on the strategy, index methodology, and risk disclosures.