Thomson Reuters identifies Saudi Arabia as a key player in the Islamic asset management space

Initial findings of Global Islamic Asset Management Report 2014 based on global survey of investors and asset managers, AUMs in Saudi Arabia exceed USD 6 billion, accounting for 20% of the global market.

Thomson Reuters identifies Saudi Arabia as a key player in the Islamic asset management space

Thomson Reuters identifies Saudi Arabia as a key player in the Islamic asset management space

Riyadh, KSA – Thomson Reuters , the world’s leading provider of intelligent information for businesses and professionals, announced today the initial findings from its Global Islamic Asset Management Report 2014, prepared in collaboration with Lipper.

Earlier this year, Thomson Reuters launched the global Islamic asset management survey to gather market consensus on the state and direction of the global Islamic asset management sector. The survey targeted both investors and asset managers in order to present a fuller picture of the Islamic asset management space.

The report provides unique insights into the development of the sector, highlighting key milestones reached this year, critical challenges to growth, as well as proposed solutions to further develop the Islamic asset management sector.

Russell Haworth, Managing Director, Middle East & North Africa, Thomson Reuters , said: “The Islamic asset management space continues to lag behind in terms of growth compared to Islamic banking. Thomson Reuters is committed to building greater insight and analysis of the Islamic Finance sector overall, and Shar’iah complaint asset management is a critical component of that industry. This year’s report will act as an important benchmark for the industry as it continues to grow.”
Key findings include:

  • With Assets Under Management (AUMs) in Saudi Arabia exceeding USD 6 billion, the Kingdom accounts for 20% of the global market and is the second largest market for Islamic funds globally
  • Saudi Arabia is also the second largest hub for Islamic funds with over 163 domiciled funds
  • The number of funds has doubled since 2007 to 786 globally
  • 2013 saw the highest number of fund launches in four years; 20% of issuances were in Gulf countries, mainly due to a large number of Saudi funds launched during the year
  • Assets under management (AUM) of global funds stand at just over USD 62 billion, with mutual funds accounting for the bulk of this amount, with over USD 46 billion
  • However, AUMs have only increased marginally over the last few years, and declined by 1.7 percent in 2013
  • The sector is primarily retail driven, with only 20% of AUMs derived from institutional investors
  • The underdevelopment of takaful operators and pension funds in Islamic countries has a knock-on effect on the Islamic asset management space
  • Compulsory registration and preceding authorization of Islamic funds with the capital market authority in Saudi Arabia has led to smaller asset managers exiting the market.

Dr Sayd Farook, Global Head of Islamic Capital Markets for Thomson Reuters , said: “Attracting institutional investors is seen a key requirement for the growth and long-term sustainability of the Islamic asset management industry. Despites the lack of institutional participation, we see positive signs, such as the development of pension assets in Islamic countries. We estimate GCC pension assets to be USD 180 billion. Attracting a small portion of these could significantly increase assets under management for Islamic asset managers.”

“Saudi Arabia is a step ahead other GCC countries as asset managers adopt innovative strategies to increase their investor base. For example, this year SEDCO Capital is coming out with their first Islamic fund that will be compatible with socially responsible investment parameters. The fund will have environmental, social and corporate governance principals incorporated into the fund investment strategy, broadening its appeal to a new range of investors.”

The Islamic Asset Management Report 2014 will be launched at the Global Islamic Economy Summit, organised by Thomson Reuters and the Dubai Chamber of Commerce & Industry, on 25th & 26th November 2013 in Dubai, United Arab Emirates. For more information and to register for the event, please visit www.globalislamiceconomy.com.

About Thomson Reuters:

Thomson Reuters is the world’s leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world’s most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs approximately 60,000 people and operates in over 100 countries. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, go to thomsonreuters.com

CONTACT
Tarek Fleihan
PR Manager, Middle East, Africa & Russia / CIS, Thomson Reuters
+97144536527
Email: [email protected]

© Press Release 2013

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Islamic fund management industry set to gain momentum

Indeed, Zarinah Anwar, chairman of the Securities Commission Malaysia (SC), the securities and fund regulator, confirmed at the International Shariah Investment Convention 2010 which was held in early December in Kuala Lumpur and organized by the SC; Bursa Malaysia, the stock exchange; and Amanie Business Solutions, that Malaysia’s Islamic fund management industry is the fastest growing segment of Malaysia’s Islamic capital market (ICM) with an annual compounded growth of more than 25 percent over the last 5 years.

Islamic fund management industry set to gain momentum

Islamic fund management industry set to gain momentum

However, statistics can be very misleading given that the base is very low and the Islamic investment fund industry still constitutes the smallest portion of the overall market which has been dominated by products such as Murabaha (cost-plus financing), Bai Bithaman Ajil (deferred payment), Ijara (leasing), Tawarruq (cash management) and sukuk (Islamic trust certificates) over the last decade or so. At best, the Islamic investment fund universe totals no more than an estimated $30 billion compared with an estimated $130 billion for sukuk.

Given the volatility of the stock markets, especially in the GCC countries where ordinary investors lost life savings on the equity markets a few years ago, GCC investors are cautious about investing in stocks. But with the real estate bubble bursting in the aftermath of the credit crunch and the global financial crisis, confidence especially in the GCC markets such as Dubai, Bahrain, Kuwait and Qatar in the traditionally favored real estate investment asset class has also taken a hit. Whether the Gulf preference for “bricks and mortar” investment continues remains to be seen.

The opportunity for Islamic asset management companies and investment banks to come up with innovative products that carry an element of capital preservation and decent returns is clear and present. Bankers very often complain about GCC investors wanting high returns with low risks that go against the grain of investment dynamics and the ethos of Islamic investment.

Nevertheless, according to Zarinah, “The Islamic fund management segment has been fully liberalized with attractive tax incentives offered by the government. We now have 15 full-fledged Islamic fund managers operating in Malaysia, including some of the biggest names in the international fund management industry. We have 152 Islamic unit trust funds with a total Net Asset Value of 23.02 billion Malaysian ringgits ($7.1billion).”

In order to further develop Malaysia’s Islamic fund management industry and to enable Malaysian investment products to be offered abroad and foreign products to be offered to Malaysian investors, the commission has actively pursued mutual recognition arrangements with other strategically important markets such as the Dubai Financial Services Authority and the Securities and Futures Commission of Hong Kong. These agreements, according to the SC, help to widen the industry’s distribution network and promote exchange of ideas to enhance product offerings, especially for funds meant for regional distribution.

Earlier in December, the SC signed a Memorandum of Understanding (MoU) with the Qatar Financial Markets Authority (QFMA) in Kuala Lumpur whereby the two capital markets regulators would strengthen cooperation and cross-border enforcement to enhance overall investor protection including in the Islamic investment fund and asset management sector.

The MoU was signed by Zarinah and QFMA Chief Executive Officer Nasser Ahmad Al-Shaibi. According to Zarinah, “In an increasingly complex financial environment, it is important for regulators to continue to strengthen their cooperative networks through greater information-sharing and collaboration in capacity building.”

Al-Shaibi similarly explained that “the MoU clarifies the importance of the exchange of technical support between the authorities in matters relating to the regulation of the securities industries. The authorities will also work together to determine the training and technical needs for the development of the stock markets for both countries, subject to the availability of the appropriate expertise and resources.”

The SC is committed to strengthening international cooperation in securities regulation and has signed 29 such MoUs with foreign capital markets regulators since 1994.

Malaysia, stressed Zarinah, is also fast becoming a center for Islamic fund and wealth management services and for international Islamic banking services, as well as a center for Islamic finance education, training, consultancy and research. All these sectors are supported by facilitative policies and underpinned by clear and robust regulatory as well as Shariah governance frameworks.

In terms of equities, Bursa Malaysia, with 961 listed companies, offers the widest and largest selection of companies in ASEAN. Currently, 88 percent of the stocks listed on the exchange making up 62 percent of total market capitalization are Shariah-compliant. Dividend yields for Malaysian stocks are currently estimated at 3.4 percent that places it among the highest in the region. This is supported by sustainable earnings growth with returns on equity estimated at almost 20 percent. The Malaysian equity market also offers investment opportunities in Malaysia’s best and largest companies, some of which have strong regional presence.

http://arabnews.com/economy/islamicfinance/article219213.ece