The recent announcement of Emirates NBD Asset Management’s Shariah compliant money market fund surpassing US$100 million is an achievement of sorts in the Islamic finance industry. Despite the volatile climate, the fund has succeeded in garnering interest from institutional and retail investors alike.
According to the asset management house, the fund was launched to provide conventional and Islamic investors a liquid strategy that is daily-dealing and captures the higher profit rates offered by Islamic banks. Deon Vernooy, its senior executive officer, said that the broad investor base and growing international distribution showed that investors want their cash to be professionally managed.Vernooy attributes the success of the Emirates Islamic Money Market Fund to a number of investment parameters that ensure suitability of return and liquidity. “Insurance companies and Takaful operators have been one group of investors drawn to the fund’s liquid and simple strategy,” he said.
Market data listed a total of 75 Islamic money market funds globally in 2010. Saudi Arabia had the highest number of funds in this asset class with 36, while Malaysia was reported to have 26. Several new funds in this asset class were also launched in 2011, particularly in Malaysia and Kuwait. The latest data as at the 31st September reveals that the number of Islamic money market funds in Malaysia, the largest issuer of Islamic funds, has increased to 31.
The popularity of money market funds in Saudi Arabia perhaps reflects investor preference for short-term placement funds that are highly liquid. This is reflected in a typical Islamic money market or trade finance fund that has a majority of the investments in Murabahah transactions (either with the parent bank or with other Islamic financial institutions) with a maturity within three and 12 months, as well as Islamic placements and notes with other Islamic banks. There are currently still no laws regulating the Islamic funds industry in the kingdom.