S&P Dow Jones Indices has launched sharia compliant indices, combining low volatility and a scheme that weights stocks by their calculated intrinsic value.
These include the S&P GIVI Developed Shariah Index, the S&P GIVI Emerging Shariah Index, the S&P Europe Shariah Index, the S&P GIVI Pan Asia Shariah Index, and S&P GIVI United States Shariah Index.
The S&P GIVI Shariah Indices is constructed from the S&P Global BMI universe, a rules-based global index covering approximately 10,000 companies in 46 countries.
But rather than weighting by market capitalisation, each stock in the S&P GIVI is weighted by its calculated intrinsic value. S&P says the intrinsic value of each stock is the sum 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.
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