THE RANGE OF SHARIAH-COMPLIANT INDICES HAS GROWN TO MEET THE EVOLVING NEEDS OF THE ISLAMIC FINANCE INDUSTRY
Since the introduction of the Dow Jones Islamic Market (DJIM) World Index nearly 20 years ago, there has been a tremendous amount of index innovation as the Islamic investment community has demanded increasingly granular and sophisticated investment solutions while adhering to the tenets of Islamic law. Today, S&P Dow Jones Indices publishes more than 10,000 Shariah-compliant indices each day. In the early years, we brought to market broad benchmarks covering various regions, as well as large-cap indices focused on prominent blue-chip companies. Soon thereafter, Shariah-compliant versions of popular benchmarks such as the S&P 500® Shariah were introduced. In the past few years, Shariahcompliant index development has expanded to include smart beta and multi-asset class strategies.
Dividend indices have long been popular with conventional investors due to their income properties and indication of long-term value. The S&P High Yield Dividend Aristocrats® was launched for conventional investors in 2005, and its success has led to the subsequent launch of its Shariah counterpart—the S&P High Yield Dividend Aristocrats Shariah Index. The index is formed by screening companies within the S&P Composite 1500® for Shariah compliance, followed by the further selection of companies that have consistently increased their dividends over the past 20 consecutive years. The result is a modern dividend capture index available for use by Shariah-conscious market participants. Exhibit 1 highlights the favorable risk and return characteristics of the S&P High Yield Dividend Aristocrats Shariah Index compared with the conventional S&P High Yield Dividend Aristocrats and the S&P 500 over the past 10 years.