Index provider IHS Markit has launched the Emirates NBD Markit iBoxx USD Sukuk Index., in collaboration with Middle East banking group Emirates NBD.
The index aims to provide a broad benchmark of the entire sukuk market including sovereign and corporate issuers.
The index, which has been designed so as to be suitable to underlie ETFs, aims to provide a transparent benchmark for investors in USD sukuk.
Sukuk are bonds that conform with Islamic finance laws that prohibit interest. Unlike conventional bonds where the issuer has a contractual obligation to pay bond holders on specified dates, sukuk entitle holders to a share of ownership, and therefore revenues, of the underlying assets.
Aram Flores, managing director, co-head of indices, IHS Markit, commented: “The creation of the Emirates NBD Markit iBoxx USD Sukuk Index is an important and timely expansion of our global iBoxx family of bond indices. In partnering with Emirates NBD, we are able to leverage the dollar-denominated sukuk market. With growing interest in sukuk, we are confident that this new, independent benchmark will help a diverse group of investors access this dynamic market.”
The index is market-cap weighted and designed to provide a broad benchmark of the entire sukuk market. Constituents include investment grade, high-yield and non-rated securities from sovereign, sub-sovereign and corporate issuers. At the time of launch, the index had 98 sukuk bonds from 61 issuers with a market value of over $90 billion.
Ahmed Al Qassim, CEO, Emirates NBD Capital, added: “Demand for sovereign and corporate sukuk has increased significantly over the last few years attracting significant international capital. The index will also enable the creation of products that will pave the way for greater access to the sukuk market for retail investors who have historically been underserved by opportunities to invest in this asset class.”
The index will join the IHS Markit iBoxx family of fixed income indices which already has over $120bn in ETF assets tracking it.