S&P Dow Jones Indices has launched a set of S&P GIVI Shariah Indices combining low volatility and an alternative scheme that weights 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 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 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 stocks in the index are Shariah-compliant.
Stocks are 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.
Vinit Srivastava, director Strategy Indices of S&P Dow Jones Indices, said the set provides investors in Shariah-compliant products with a relevant, important benchmark in the alternative beta space.
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 2,000 indices across 46 countries and seven 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: US dollars, euros, sterling, yen, Canadian dollars, Australian dollars, 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.