S&P Dow Jones Indices announced the launch of S&P GIVI Shariah Indices, the first Shariah-compliant indices combining low volatility and an alternative weighting scheme that weight’s a stock by its calculated intrinsic value, rather than by market capitalization.
The S&P GIVI is constructed from the S&P Global BMI universe, a comprehensive, rules-based global index covering approximately 10,000 companies in 46 countries. Each stock in the S&P GIVI is weighted by its calculated intrinsic value. The intrinsic value of each stock is the sum of two components: the value of assets in place plus the value of growth opportunities.
To achieve its goal of low volatility, S&P GIVI excludes, for each country represented in the S&P Global BMI, the 30% of market capitalization with the highest beta. Remaining stocks are then weighted by a rules-based measure of intrinsic value.
The Shariah-compliant indices apply Shariah screens to the stocks in the S&P GIVI Indices. Shariah screenings consist of business and financial screenings that are applied to the stock universe, the parent GIVI index, to make sure that the stocks in the index are Shariah-compliant. Stocks are thus added and/or dropped from the parent GIVI index based on the Shariah compliance rating every month. The weights of the stocks are retained from the parent GIVI index which rebalances semi-annually in March and September. There are currently four Shariah-compliant regional indices and one country index: S&P GIVI Developed Shariah Index; S&P GIVI Emerging Shariah Index; S&P GIVI Europe Shariah Index;
S&P GIVI Pan Asia Shariah Index; and S&P GIVI United States Shariah Index.
“The S&P GIVI Shariah indices provides investors in Shariah-compliant products with a relevant, important benchmark in the alternative beta space,” Vinit Srivastava, Director, Strategy Indices of S&P Dow Jones Indices, said.
S&P Dow Jones Indices has licensed the base S&P GIVI (and its complete family of emerging market and developed sub-indices, a total of over 2000 indices across 46 countries and 7 currencies) to Goldman Sachs Asset Management (GSAM). GSAM conceived the strategy and helped S&P Dow Jones Indices to develop this concept.
The S&P GIVI is calculated in seven currencies: U.S. dollars (US$), Euros (€), British pounds (£), Japanese Yen (¥), Canadian dollars (C$), Australian dollars (A$), and Domestic Currency Return (DCR). The Index rebalances twice a year on the third Friday of March and September. Gross and net total return indices are calculated for all major components of the S&P GIVI.