FTSE Group has launched the FTSE Shariah Developed Minimum Variance Index, which aims to deliver reduced index volatility through ethical and financial screening.
The methodology for the FTSE Shariah Developed World Index has been designed to target a balanced index risk profile by overweighting stocks that reduce index volatility and underweighting stocks that increase index volatility.
The contemporary Islamic banking and finance industry has grown rapidly over the last 30 years and now comprises over USD1trn dollars of AUM. This growth has been accompanied by a requirement for appropriate asset management tools including benchmark equity indices that are Shariah-compliant. FTSE Shariah equity indices include a business screening, where companies involved in ineligible activities are excluded, and a financial screening. The indices have been created in partnership with Yassar Limited, an independent consultancy, and have been certified as Shariah compliant through the issue of a Fatwa by Yassar’s principals.
Kevin Bourne (pictured), managing director – ESG, FTSE Group, says: “We are delighted to be able to launch our new suite of Shariah-compliant indices, which reflect the growing demand from investors for best-in-class benchmarking tools. The new index series adopts a conservative approach to Shariah-compliance, combined with a quantitative methodology that targets lower risk and is better aligned with Shariah principles.
“Working in partnership with Yassar Ltd, the new index series has been fully certified as Shariah compliant and builds on FTSE’s portfolio of innovative, alternatively-weighted indices.”