By Abdul Hameed Yousuf,
Mumbai: The Benchmark Asset Management is all set to launch the first-ever Shariah Benchmark Exchange Traded Fund in India.
Rajan Mehta, Executive Director of Benchmark Asset Management talked to TwoCircles.net about the new offering.
Exchange Traded Funds are like mutual funds but the stocks can be freely traded. The fund makes money by trading in different company stocks. In this case all companies that the fund can invest in have to follow business and accounting practices that follow the Islamic laws.
Benchmark has contacted UK based Ratings Intelligence Partners (RI) to weed out companies that are not shariah compliant.
The open-ended listed index scheme will be benchmarked against S&P CNX Shariah Index. Each unit is priced at 1/10th of the S&P CNX Nifty. It will be open for subscription on February 4 and will close on February 25, 2009.
The S&P CNX Shariah index was launched by Standard & Poor’s and India Index Services & Products and it comprises the stocks that are Shariah compliant.
The constituents of S&P CNX Nifty index are screened for Shariah compliance. The process is done mainly by two criteria; Sector Based Screen and Accounting Based Screen.
In the Sector Based Screen after reviewing the audited annual report, the companies found involved in non-compliant business activities such as alcohol, pork, gambling and pornography etc. are screened out.
The companies after passing through Sector Based Screening are subjected to Accounting Based Screen to examine their financial ratios being three areas of leverage, cash and the share of revenues derived from non-compliant activities, focused mainly.
The companies that are Shariah compliant form the Nifty Shariah index. Shariah is Islamic canonical law based on the teachings of the Quran and Hadith.
At present, the Nifty Shariah Index comprises 37 constituents as on January 13, 2009 and covers around 78% of the market capitalization of the parent index as on January 13, 2009.
S&P has contracted with Ratings Intelligence Partners (RI) to provide the Shariah screens and filter the stocks based on these screens. Benchmark Assist Management also follows RI in this regard.
RI, a London/Kuwait based consulting company specializing in solutions for the global Islamic investment market, consists of qualified Islamic researchers who work directly with Shariah Supervisory Board.
‘The investment objective of the Scheme is to provide returns that, before expenses, closely correspond to the total returns of the securities as represented by the S&P CNX Nifty Shariah Index by investing in securities which are constituents of S&P CNX Nifty
Shariah Index in the same proportion as in the Index. However, the performance of Scheme may differ from that of the underlying index due to tracking error.’
Scheme Detail:
Face Value: Rs. 10/- (Rupees Ten Only).
Minimum Application Amount: Rs. 10,000/- (Rupees Ten Thousand Only)
and in multiples of Re.1/- thereafter.
Asset Allocation: Securities covered by the S&P CNX Nifty Shariah
Index -90%-100%, Cash-0%-10%.
Options: The scheme offers only Growth option.
Load Structure (During New Fund Offer)*
Entry Load: Investment of Rs. 10,000 to Rs. 49, 99,999-1.5%
Investment of Rs. 50, 00,000 to Rs. 1, 99, 99,999-1.00%
Investment of Rs. 2, 00, 00,000 to Rs. 4, 99, 99,999-0.50%
Investment of Rs. 5, 00, 00,000 and above-Nil
Exit Load: Nil.
Benchmark Index: S&P CNX Shariah Index.
Who Can Subscribe
The following persons (subject, wherever relevant, to purchase of
units being permitted under respective constitution and relevant state
regulations) are eligible to subscribe to units:
1. Resident Adult individuals, either singly or jointly.
2. Parents/Lawful Guardian on behalf of minors.
3. Karta of Hindu Undivided Family (HUF).
4. Partnership Firms.
5. Companies/Domestic Corporate Bodies and Societies/Association of Persons/Body of individuals/Clubs/Public Sector Undertakings registered in India if authorized and permitted to under applicable laws and regulations.
6. Charitable or Religious Trusts authorized to invest in units of Mutual Funds.
7. Banks (including co-operative Banks and Regional Rural Banks), Financial Institutions and Investment Institutions incorporated in or the Indian branches of banks incorporated outside India.
8. Non-Resident Indians, persons of Indian origin residing abroad (NRIs) on full repatriation basis and on non-repatriation basis.
9. Foreign institutional investors on full repatriation basis (subject to RBI approval)
10. Wakf Boards or endowments and Registered Societies (including registered co-operative societies) and private trusts authorized to invest in units.
11. An association of persons or body of individuals whether incorporated or not.
12. Army/Air Force/Navy/Para-military funds and other eligible institutions.
13. Scientific and/or industrial research organizations.
14. Multilateral Funding Agencies or Bodies Corporate incorporated outside India with the permission of Government of India / Reserve bank of India.
15. Overseas Financial Organizations which have entered into an arrangement for investment in India, inter-alia with a mutual fund registered with SEBI and which arrangement is approved by Government
of India.
16. Provident / Pension / Gratuity / Super-annuation and such other retirement and employee benefit and other similar funds.
17. Other Associations, Institutions, Bodies, Mutual Funds etc. authorized to invest in the units. Apart from the above, all othercategories of investors permitted at present and in future are
eligible to invest in the Scheme.’
Link:
http://www.benchmarkfunds.com/static/staticinfo.cgi?filename=sbDownloads.htm