faith based indexing and the dharma approach
DESCRIPTION
Talk given by Sumeet NihalaniDow Jones IndexesMay, 2008TBLI Conference, Bangkok, ThailandTRANSCRIPT
© Copyright 2007 Dow Jones and Company, Inc.
Faith Based Indexing and the Dharma Approach
Sumeet NihalaniDow Jones Indexes
May, 2008TBLI Conference, Bangkok, Thailand
Proprietary and Confidential | © Copyright 2007 Dow Jones and Company, Inc.
INTRODUCTION: DOW JONES INDEXES
DOW JONES & FAITH BASED INDEXES
DOW JONES DHARMA INDEXES
PERFORMANCE OF DHARMA INDEXES
DOW JONES INDEXES
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INTRODUCTION: DOW JONES INDEXES
Dow Jones Indexes is part of Dow Jones & Company which is a subsidiary of News Corporation.
Dow Jones is a leading provider of global business news and information services, that publishes The Wall Street Journal, Barron's, MarketWatch and the Far Eastern Economic Review. Its Enterprise Media Group includes Dow Jones Newswires, Factiva, Dow Jones Client Solutions, Dow Jones Indexes and Dow Jones Financial Information Services. Its Local Media Group operates community-based information franchises. Dow Jones owns 33% of STOXX Ltd.a leading index provider in Europe.
Dow Jones created the world’s first market benchmark, the Dow Jones Industrial Average and the world’s first faith-based indexes the Dow Jones Islamic Market Indexes.
Dow Jones Indexes is an independent full-service provider, supplying accurate, reliable and transparent index data.
Dow Jones Indexes develops, maintains and licenses equity, commodity, hedge fund, mixed asset classes and REIT indexes for use as benchmarks and as the basis of investment products.
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INTRODUCTION: DOW JONES INDEXES
Most recognized index provider globally.
More than 170 people globally support the Dow Jones and Dow Jones STOXX indexes.
Offices in Asia (Beijing, Hong Kong, Singapore), Europe (Frankfurt, London, Madrid, Paris, Stockholm, Zurich), U.S. (Boston, Los Angeles, New York, Princeton), South America (Mexico City, Santiago, São Paulo), Middle-East (Dubai)
Dow Jones Indexes and STOXX Ltd. publish more than 130,000 indexes. The Dow Jones STOXX index family is the European component of the Dow Jones Global Index family.
More than 800 licensees worldwide on the Dow Jones and Dow Jones STOXX indexes with more than 19,000 products issued.
More than $2.1 trillion assets tied to the Dow Jones and Dow Jones STOXX indexes as of October 2007.
In 1997, STOXX Ltd. was formed by Deutsche Börse AG, Dow Jones & Company and SWX Group; On February 28, 1998 the Dow Jones STOXX indexes were launched.
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FAMILY OF OVER 130,000 INDEXES INCLUDES:
Equity Indexes Dow Jones AveragesDow Jones Global IndexDow Jones STOXX Total Market IndexDow Jones Wilshire Global Total Market IndexDow Jones Islamic Market IndexesDow Jones Dharma IndexesDow Jones & Dow Jones STOXX Select
Dividend Indexes
Alternative Investment Indexes Dow Jones AIG-Community IndexDow Jones Hedge Fund Strategy Benchmarks
Fixed Income Indexes Dow Jones Corporate Bond Index
Mixed Asset Class Index Dow Jones Target Date Indexes
Real Estate Investment Trust Dow Jones REIT Composite IndexIndexes Dow Jones Wilshire REIT Index
Dow Jones STOXX 600 Real Estate Index
INTRODUCTION: INDEX FAMILY OVERVIEW
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FIVE DIMENSIONS
Regions Sectors Size
- Europe 4 levels of sector classification 3 sizes:
- America - 10 Industries Total Market Indexes
- Asia - 18 Supersectors - Large Cap Indexes
- Global - 39 Sectors - Mid Cap Indexes
- Emerging Markets - 104 Subsectors - Small Cap Indexes
Style Themes
Growth SustainabilityValue Islamic(Style indexes are calculated Dharma (launched January 15, 2008)for each of the sizes) Dividends
VolatilityReal EstateSport (Football, Grand Prix, Summer Games 2008)
INTRODUCTION: INDEX FAMILY OVERVIEW
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Dow Jones Indexes pioneered faith based investing with the
launch of the Dow Jones Islamic Market Indexes
The largest, most visible, widely used set of Sharia’h-compliant indexes in the world
More than 70 indexes: Country and Regional Sector Size (cap-range) Specialty Indexes: Dow Jones Citigroup Sukuk Index, Dow Jones
Islamic Market China Offshore Indexes, Dow Jones DFM Indexes
Winner of numerous awards on the quality of Islamic indexes and industry contribution
DOW JONES & FAITH BASED INDEXES
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DOW JONES DHARMA INDEXES
OBJECTIVE
The Dow Jones Dharma Indexes are the first faith-based indexes created to measure equities in compliance with the value systems and principles of Dharmic religions, especially Hinduism and Buddhism.
The Dow Jones Dharma Indexes are designed to underlie financial products such as funds, structured products and exchange-traded funds.
The Dow Jones Dharma family includes five indexes:
Dow Jones Dharma Global Index (USD) Dow Jones Dharma US Index (USD) Dow Jones Dharma UK Index (GBP & USD) Dow Jones Dharma Japan Index (JPY & USD) Dow Jones Dharma India Index (INR & USD)
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DHARMA – THE CONCEPT
Dharma derives form the sanskrit root dhri “to uphold”,“to sustain”.
Variously translated Dharma relates with “duty”, “ethics”, “law” and “teachings”
The following values have key relevance to Dharma investing:
Hinduism
Ahimsa, or non-aggression
Loka-samgraha, or the concept of stewardship
Buddhism
Karuna, undertaking to avoid of any intentional killing of any living being
Metta, or loving kindness and generosity
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DHARMA APPLIED
Application of the Principles of Ahimsa/Karuna
The guiding principles of Ahimsa and Karuna exclude industries involved with unnecessary violence.
As an example industries related to animal slaughter - such as food industries using meat products are excluded. Also excluded is the Defence and armament industry.
Application of the Principles of Loka-samgraha/Metta
The principles of Loka-samgraha and Metta embrace the tenets of corporate governance, environmental responsibility and stewardship.
As such, these principles require exclusion of companies that could be considered to have a significant negative impact on the environment or society.
A unique combination of positive (environmental, social, governance) and negative (traditional sin sector) filters – with broad appeal to both religious and secular investors.
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METHODOLOGY
Component Selection The top 5000 components of the Dow Jones Wilshire Global Total Market Index as
measured by free float market capitalization, plus all of the components in the Dow Jones Wilshire Country Indexes.
Dow Jones Dharma Index components are selected by screening for business activities, industry, environmental, corporate governance and qualitative criteria that are not suitable for Dharmic investment purposes
Index Characteristics Internationally accepted methodology for construction, calculation and dissemination
Rules-based and investable Disseminated globally Stocks reviewed on a quarterly basis. Corporate actions affecting index components
(e.g., mergers, de-listings) reflected immediately
DOW JONES DHARMA INDEXES
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Industry Screens Examples for unacceptable sectors: Pharma & Health Care Supplies, Aerospace and Defense, Hypermarkets and Super Centers, Broadcasting and Cable TVExamples for unacceptable business practices: Adult Entertainment, Animal Testing, Contraceptives/Abortifacients, Defense and weaponry, Tobacco & Alcohol
Environmental ScreensExamples: Emissions, Climate change and carbon footprint analysis, Oil and chemical spills, Waste management and recycling
Corporate Governance ScreensExamples: Labor relations/disputes/discrimination allegations, Human rights violations, Working conditions/wages
DOW JONES DHARMA INDEXES
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PERFORMANCE
Index Date Cumulative Return Since 12/31/2002
Dow Jones Dharma Global Index 12/31/2002 115.01%
Dow Jones World Index 12/31/2002 106.62%
Dow Jones Dharma U.S. Index 12/31/2002 62.52%
Dow Jones Industrial Average 12/31/2002 53.83%
Dow Jones Dharma U.K. Index 12/31/2002 34.16%
Dow Jones U.K. Titans 50 Index 12/31/2002 55.00%
Dow Jones Dharma Japan Index 12/31/2002 82.52%
Dow Jones Japan Titans 100 Index 12/31/2002 68.50%
Dow Jones Dharma India Index 12/30/2005 71.95%
Dow Jones India Index 12/31/2005 29.34%
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DOW JONES DHARMA INDEXES
Dow Jones Dharma India Index2007 Performance
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
Jan-0
7
Jan-0
7
Jan-0
7
Feb-0
7
Feb-0
7
Mar-
07
Mar-
07
Apr-
07
Apr-
07
May-0
7
May-0
7
Jun-0
7
Jun-0
7
Jul-07
Jul-07
Jul-07
Aug-0
7
Aug-0
7
Sep-0
7
Sep-0
7
Oct-
07
Oct-
07
Nov-0
7
Nov-0
7
Dec-0
7
Dec-0
7
Dec-0
7
DJ Dharma India Index + 59.90%
BSE Sensex + 47.15%
S&P CNX Nifty +54.77%
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BENEFITS
Establishes standards for Dharmic investors.
Produced by a leading and trusted global index provider
Credible and internationally recognized boards of experts.
Enable companies to increase exposure for their brand.
DOW JONES DHARMA INDEXES
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DOW JONES DHARMA INDEXES
SUMMARY
WEIGHTING Free Float Market Capitalization
REVIEW FREQUENCY Quarterly
CALCULATION In USD, GBP, JPY, INR
DISTRIBUTION End Of Day
BASE VALUE/BASE DATE 1000 as of December 31, 2002
DATE INTRODUCED January 15, 2008
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Sustain Faith, for Faith is Sustainable
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DOW JONES DHARMA INDEXES