Itqan Capital was launched last week in Saudi Arabia. Formerly the Altawfeek Financial Group, the new entity is now majority-owned by Bahrain’s Al Baraka Banking Group (ABG) through its subsidiary Al Baraka Islamic Bank, which acquired a 60% stake of the Saudi-based closed joint stock company in October last year.
It has been reported that Altawfeek Financial Group has an authorized capital of SAR360 million (US$96 million) and undertakes Shariah compliant asset and portfolio management, custody, debt and equity arranging as well as research and advisory services.
Adnan Ahmed Yousif, the president and chief executive of ABG, termed the acquisition of Altawfeek Financial Group as a “strategically vital acquisition for the group” which reflected its strategy to enter key regional markets such as Saudi Arabia, which it considers to be the largest Arab economy with strong fundamentals and a stable financial and investment environment.
With global uncertainties abounding on the back of the continuing Eurozone debt crisis and the recent downgrade of several European countries by Standard & Poor’s, increasing numbers of investors are turning to Islamic finance as an alternative to the troubled conventional markets. Even conventional asset management and investment companies are joining the fray to obtain Islamic offerings for their portfolios.
Earlier last year, global investment banking and securities firm Goldman Sachs acquired Benchmark Mutual Fund in a deal rumored to be around a value of INR1.3 billion (US$25.1 million). As at October last year, Benchmark currently managed about INR32 billion (US$619.32 million)-worth of assets, mainly through exchange traded funds. Benchmark also manages GS S&P Shariah BeES – the first and only Shariah compliant ETF in the country.
Perhaps the biggest news in this sector last year was the merger of Nikko Asset Management (Nikko AM) and DBS Asset Management (DBSAM), completed at the end of September. The merger involved the acquisition of DBSAM by Nikko AM for S$137 million (US$104 million). It raised some eyebrows in the Islamic finance industry as Nikko AM also acquired a 51% stake in Asian Islamic Investment Management (AIIMAN), which is a joint venture between Singapore’s DBSAM and Hwang-DBS (Malaysia) focused on Shariah compliant investment solutions.
Despite its new shareholder, AIIMAN has however made no changes in terms of management personnel or the direction of the company. This was Nikko AM’s maiden foray into the Islamic finance industry. As at the 31st July 2011, AIIMAN’s total assets under management, comprising corporate and discretionary portfolios, stood at approximately RM3.37 billion (US$1.07 billion).
Nikko AM highlighted its strategic plan to establish itself as a leading Asian asset management firm when it subsequently entered into a joint venture (JV) with Ambit Holdings to provide investment management and advisory services.
Under the JV, Nikko AM will take up a 50.1% ownership of Ambit Mauritius Investment Managers, which manages Ambit QInvest India Fund, a Shariah compliant long/short India-dedicated equity fund based out of Mauritius. It will also take up to a 49% stake in Ambit Investment Advisors.
The joint venture will also manage and advise the dedicated India funds of Nikko AM and Ambit Holdings, whose assets under management amounted to US$150 million as at the 30th September 2011.The partnership also gives Ambit the ability to tap into Nikko AM’s product development capabilities and extensive network of over 300 distributors across Asia. In addition, it provides Nikko AM with local knowledge and investment expertise for its India funds.
The biggest challenge faced by the majority of asset managers with Islamic funds is a lack of breadth and depth compared to conventional asset management firms. Indeed, performance of such funds in terms of returns does play a significant part in attracting investors (particularly institutional investors).
However, these investors are also interested in the size of such funds, as well as the reputation of the fund house, and perhaps this is an alternative way forward for the Islamic asset management industry. Mergers may be a solution to provide much needed leverage for smaller boutique Islamic asset management firms, enabling them to find a presence in the international arena. — RW