Global Islamic fund assets under management (AuM) grew by 7.6 per cent to $58 billion in 2010, up from $53.9 billion in 2009, according to Ernst & Young Islamic Funds & Investments Report.
The growth was largely due to market performance and partially on account of new money inflows, said the report, which was released on Monday at the World Islamic Funds and Capital Markets Conference in Bahrain. “Concentration in equities remains, as they account for 39 per cent of the $58 billion assets under management, or AuM. But bringing new money into equities is challenging. Fixed income, commodities and alternatives did well in 2010, which was a record year for Sukuk with issuance of $ 50 billion.”
According to Ernst & Young report, 23 new Islamic funds were launched in 2010 while 46 were liquidated as the industry continued to realign itself. The Islamic funds universe comprises some 100 fund managers and 800 Islamic funds but represents only 5.6 per cent of the $1 trillion Islamic financial services industry.
The addressable universe for Islamic fund managers is in excess of $500 billion, growing by 10-15 per cent annually. In the GCC, liquid wealth of Shariah sensitive investors is expected to add more than $70 billion to Islamic funds by 2013.
Ashar Nazim, MENA Head of Ernst & Young’s Islamic Finance Services, said given the industry’s flat performance since 2007, a growth in 2010 was welcome development.
“Looking ahead, the challenging times are by no means over. There are serious concerns about the increasing likelihood of sovereign debt crisis in Europe and a double dip recession in the US. Both these factors will continue to influence conventional and Islamic asset managers through 2012.”
The seventh Annual World Islamic Funds and Financial Markets Conference which opened at the Gulf Hotel, Bahrain, saw more than 400 leaders in the international Shariah-compliant funds and investments industry engage in critical discussions that focused on developing forward-thinking strategies to get the industry back on the high-growth track, achieve critical mass, and adapt to the new global economic landscape. Abdul Rahman Mohammed Al Baker, Executive Director – Financial Institutions Supervision at the Central Bank of Bahrain, inaugurated the event with a special opening keynote address.
Addressing the media at the event, David McLean, Managing Director of the World Islamic Funds and Financial Markets Conference said that “Financial centres across the globe are vying to become ‘domiciles of choice’ for Islamic funds. With many new international markets now opening their doors to Islamic finance and investments combined with the increasing internationalisation of large-scale transactions, it is essential to understand the rapid development of the most dynamic regions and build a deeper relationship between the key markets - so that leading institutions are better placed to compete on a global scale.”
Dr Jarmo Kotilaine, Chief Economist at the National Commercial Bank, said that after a brief setback in 2010, the GCC region is witnessing increased activity in the sukuk market.
“Driven by favorable demography and infrastructure development needs, economic activity is rising again in the GCC economies and major investments and fund raising are done through sukuk issuance. Funds raised through sukuk in GCC in 2011 has reached 38 per cent ($17 billion) of global issuance till September 2011, which was only 28 per cent ($7.6 billion) and 22 per cent ($6.1 billion) in 2009 and 2010, respectively.”
He also said that the corporate sukuk issuance revived in 2011 accounted for around 87 per cent ($14. billion) of total issuance as compared to 77 per cent ($4.6 billion) of total issue in 2010.”
—issacjohn@khaleejtimes.com
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