Following last year’s launch of Australia’s first Islamic Australian equity fund, Thomson Reuters and Crescent Wealth have announced the launch of a specialised index that will give investors the means to build an Islamic-compliant Australian equities portfolio.
Crescent Wealth stated that the Thomson Reuters Crescent Wealth Islamic Australian index is the only such benchmarking tool used in the Australian market and a key step towards Islamic investment in Australia, which the investment manager expects will grow to as much as $13 billion in funds under management by 2019.
“Australian markets are stable and have attractive growth fundamentals that Islamic investors are looking for in today’s challenging macro-environment,” said Thomson Reuters global head of Islamic finance and OIC Countries Rushdi Siddiqui.
The index screens Australian Securities Exchange-listed companies for compliance with Islamic investment principles and will initially span 143 securities with a combined market capitalisation of more than $160 billion.
The index excludes banks, conventional financial stocks and companies with high levels of debt or leverage.
According to Crescent Wealth, compliant companies are reviewed on a quarterly basis for continued compliance with the Accounting and Auditing Organisation for Islamic Financial Institutions standards.
Crescent Wealth managing director Talal Yassine said that the index will help to sell the Australian Islamic investment proposition to investors offshore.
“There is a huge untapped potential to grow Islamic-compliant investment in Australia from investors here and in Asia and the Middle East,” he said.
Yassine added that the investment theme of the index has broad appeal to conventional investors, particularly those with an ‘ultra-ethical’ investment strategy.
He said such investors will be attracted to the index’s weighting towards low levels of debt and leverage, low account receivables and the fact that compliant companies invest a greater proportion of their funds back into the business rather than letting it rest in cash or short-term investments.