Wednesday, May 27, 2009

Standard & Poor’s launches Shariah-compliant index

Standard & Poor’s today introduced a Shariah-compliant version of the S&P/TSX 60. The S&P/TSX 60 Shariah Index is highly correlated to the S&P/TSX 60 Index, S&P says, providing a comparable investment portfolio while adopting explicit selection criteria defined by Islamic law.

“The S&P/TSX 60 Shariah Index will create new opportunities for Islamic investors to benchmark their Canadian investments, and for asset managers to create new investment products serving the Islamic community,” says Alka Banerjee, vice president of Standard & Poor’s Index Services. “With the launch of this index, S&P now has Shariah compliant Indices in 52 markets.”

The new index excludes businesses that offer products and services that are considered unacceptable according to Shariah law, such as stocks of companies that operate in alcohol, entertainment, financial services, pork-related products, and tobacco, as well as companies whose financial ratios may violate the compliance measure. All index constituents are evaluated on an ongoing basis to ensure the index maintains strict Shariah compliance, S&P adds.

The S&P Shariah Indices are screened by Rating Intelligence Partners, a Kuwait-based consulting company specializing in the Islamic investment market.

Canada is currently home to one Shariah-compliant mutual fund, FrontierAlt Oasis, which is designed to provide long-term capital growth through an actively managed portfolio of primarily Canadian securities that adhere to Shariah investment principles.

As of April 30, 2009, FrontierAlt Oasis had a three-month return of 3.88%, but was down -41.89% since April 2008, according to Globefund.

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