FTSE Yasaar
Total assets denominator. Asset-heavy companies look very different here.
FTSE Yasaar switches the denominator from market cap to total assets. This is a meaningful change. Brand-rich companies like Nike or Apple often pass market-cap-based screens but fail asset-based ones because their market cap dwarfs their physical asset base.
What it is
FTSE Russell partnered with Yasaar Limited (a UK-based Islamic finance consultancy) to build a Shariah methodology that uses total assets as the financial denominator.
Why total assets?
Some Shariah scholars argue that total assets is a more stable and intrinsic measure of a company's financial structure than market cap, which can swing on sentiment. Yasaar adopted this view.
Practical implications
Apple passes AAOIFI, DJIM, and S&P Shariah easily, but fails FTSE Yasaar because its $3.8 trillion market cap is far larger than its ~$360 billion asset base. The cash-to-assets ratio comes out high.
Financial ratios
- Interest-bearing debt / Total assets< 33.33%
- Cash and interest-bearing securities / Total assets< 33.33%
- Accounts receivable / Total assets< 50%
- Non-permissible income / Total revenue< 5%
Who uses it
- FTSE Shariah Global Equity Index
- Several UK and Asian Islamic funds
Sources
- FTSE Russell Yasaar Index Methodology
- Yasaar Limited research papers
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