The FTSE IdealRatings Islamic Index Series is designed to provide a family of Shariah compliant indices for global investors. Screening is undertaken by Shariah screening provider, IdealRatings.
The FTSE IdealRatings Islamic Index Series includes a range of indices based on the FTSE Global Equity Index Series, regional indices from the FTSE Global Total Cap Index and FTSE Frontier Index, as well as indices from the Russell US Index family and FTSE Global Infrastructure Index Series. The index series includes:
- FTSE IdealRatings Developed Islamic Index
- FTSE IdealRatings Emerging Islamic Index
- FTSE IdealRatings All-World Islamic Index
- FTSE IdealRatings Middle East & Africa Extended Islamic Index
- FTSE IdealRatings Middle East & North Africa Extended Islamic Index
- FTSE IdealRatings GCC Extended Islamic Index
- Russell IdealRatings 1000 Islamic index
- FTSE IdealRatings Global Core Infrastructure 50/50 Islamic Index
Other Islamic indices available:
FTSE IdealRatings Saudi Arabia Free All Cap Islamic Index
The screening approach follows a set of transparent principles that covers both business activity screening and financial screening.
Ideal Ratings Screening Approach:
Business activity screening
Investment is not allowed in companies deriving more than 5 percent of their total revenue from any of the following activities:
- Conventional finance (non-Islamic banking, finance and insurance, etc.)
- Alcohol
- Pork-related products
- Defence/Weapons
- Gambling/Casino
- Music
- Cinema
- Adult entertainment
- Advertising services in TV, newspapers and billboards
- Gold and silver hedging
- Not slaughtering according to Islamic principles
Financial ratios
The remaining companies are then further screened on a financial basis. The following financial ratios must be met for companies to be considered Shariah-compliant:
- Total debt over average daily market cap (for the previous 24 months) to be 33% or less
- Sum of cash and interest-bearing items over average daily market cap (for the previous 24 months) to be 33% or less
- Total interest and non-compliant activities income should not exceed 5% of total revenues
- No investment in fixed income preferred shares allowed
- No investment in trust units is allowed
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