Russell Investments and Jadwa Investment have signed an agreement to launch a sharia-compliant Russell-Jadwa Shariah Index series, which will become live within the next few weeks.
The Russell-Jadwa Index series will be screened from the 10,000-stock Russell Global Index universe. It will contain more than 2,700 stocks from more than 60 countries. The new index series will be available by region, country, developed and emerging markets, capitalisation size, sector, industry and style.
The index will be approved and monitored by a sharia board made of several scholars. Specific sector and financial filters will be applied to exclude businesses that offer products and services that are considered unacceptable or non-compliant according to sharia law.
"The last decade has witnessed stellar growth for Islamic finance and sharia-compliant funds," says Andrew Doman, president and CEO of Russell. "We believe our screen offers the strictest sharia compliance. Our methodology will filter out many more financial companies than our competitors."
Global index provider FTSE Group's FTSE Shariah Global Equity Index Series launched in January 2008, is also being touted as an index series that serves the needs of conservative investors who follow stricter guidelines when it comes to sharia investing. The FTSE series uses asset-based debt screening, which ensures that companies do not pass the screening criteria merely due to market place fluctuation.
Sharia principles generally preclude investments in businesses such as conventional financial services, alcohol, pork-related products, gambling, leisure and entertainment. They also preclude interest-bearing investments and investments in companies with unacceptable levels of debt.
Assets in sharia-compliant investments total around $65 billion worldwide, according to financial services research firm Cerulli Associates. Another $600 billion of Islamic money is locked up in fixed deposits, according to industry sources.
Doman says he expects $1 billion in assets to be benchmarked against the new Russell-Jadwa Index.
"As managers of sharia-compliant funds and discretionary accounts, we have often struggled to find benchmarks that would provide an appropriate comparison with peers and an accurate measurement of our performance," says Fadi Tabbara, Jadwa's head of asset management and CIO. Tabbara believes the new index series will fill that void.
Russell is a Tacoma-based global investment company with around $136 billion in assets under management. Jadwa is a Saudi company regulated by the Saudi Arabian Capital Markets Authority and offers a range of sharia-compliant investment services.