The Investors Day of the IFN Asia Forum 2014 kicked off with a keynote address delivered by Isa Rachmatarwata, the senior advisor of financial regulation and capital market from Indonesia’s Ministry of Finance. This was followed by the first session of the day which brought together key practitioners from the asset management industry to express their views on investment strategies on a five-year route.
The main theme of the dialogue was the apparent lack of trust in the global finance scene, emphasized by Nicholas Kaiser, the chairman and chief investment officer of US-based Saturna Capital. The ‘passporting’ of funds and accessibility into foreign markets were also highlighted as a fundamental necessity for the continual development of Islamic funds. Catering to investor demand as well as investor education in asset diversification remains an essential key to unlocking the growth potential of the market segment.
Moderated by Noripah Kamso, the former advisor to CIMB Islamic, the subsequent session of the forum featured the shifting trends and winning strategies for Islamic funds. Among the tactics suggested were: to leverage on the growth of the middle class, the upgrade of Qatar and the UAE to emerging market status and the high potential of ETFs. Mushthaq Ahmad Ibrahim, CEO of KFH Asset Management, highlighted that it is high time that the industry breaks the myth that Shariah compliant investments are only available to Muslims.
The industry also needs to move away from private equities, fixed income and tangible assets for diversification. Green technology was pointed out as an upcoming area for socially responsible and Shariah compliant investments. The panel of speakers also emphasized that sovereign funds should allocate a portion of their portfolio to Islamic investments as a means of catapulting the market segment to competitive levels.
In a comprehensive presentation, Dr Amat Taap Manshor, CEO of the Finance Accreditation Agency, deliberated on the shortage of talent in terms of both numbers and quality. He explained that there is a dire need for setting international benchmarks and proper structures for learning standards, quality of education and certified qualifications.
In a focus on Shariah compliant funds in Asia, the panel of speakers came to a consensus that real estate had maintained its position as the industry’s most popular alternative asset class. Abdulkader Thomas, CEO of Shape Financial, predicted that Islamic asset managers may soon be in a position to fill a gap in the market for investors that is not being met by conventional private bankers in terms of alternative products.
In terms of challenges facing the market segment, Jamaluddin Nor Mohamad, the director of Islamic and alternative markets at Bursa Malaysia, pointed out that currency and the facilitation of cross-border transactions are among the limiting factors for expansive investment in Asia from the West.
Moving on to the Takaful sector, various aspects of advancing Asia’s Takaful industry were debated. Azim Mithani , CEO of Prudential BSN Takaful Malaysia, highlighted that the industry is still building in capacity and developing governance, although the industry has now reached a maturity of 30 years.
Despite Family Takaful outpacing the compound annual growth rate of conventional insurance by 20%, innovation in the industry remain scarce. Albert Wiseman Paterson, the president director of SunLife Financial in Indonesia, particularly highlighted that talent shortage could pose as a setback for Takaful operators in Indonesia if legislation requiring the spin-off of Indonesia’s 17 Takaful windows into standalone entities were to be passed.
The final session of the two-day forum discussed the developments in the Islamic interbank and wholesale lending market. Regardless of the contentious status of commodity Murabahah, the view of the speakers, was that the structure is here to stay. Tom Guest, the associate director of Eiger Trading Advisors, opined that the strength and utility of structures other than the commodity Murabahah, in particular repos, can recreate a secondary market for Sukuk. A suggestion that was brought up by Cassim Docrat, the director of DDCAP (DIFC), was a collaboration with the Islamic Development Bank (IDB), to host a debate regarding the idea of the establishment of a banker’s acceptance system for OIC countries.