GLOBAL: As Dubai prepares to host the first-ever IFN Islamic Investor Forum this week, the market demonstrates continued strength with ongoing and evolving opportunities and an Islamic asset management sector that is rarely out of the news. Just this week, Ernst & Young announced expectations that Shariah compliant assets in the UAE could double to US$263 billion by 2019, from US$127 billion in 2014; highlighting the exceptional potential for progress in the fast-moving funds market.
“The opportunities for diversified and innovative product are greater than they have ever been with investor appetite showing strong demand for a more sophisticated Islamic product offering diversification both geographically and through product complexity,” agreed Alex Armstrong, the managing director of Qatar-based QInvest, speaking to IFN.
As the Islamic markets strengthen and deepen, the capital markets go from strength to strength as corporates jump on board to buttress this optimistic growth. On the debt side, giants such as Majid Al Futtaim recently announced plans to double its growth within five years using bonds and Sukuk; while in the equity markets major mainstream players have also jumped onboard – such as Vodaphone Qatar, who this month announced the switch of all its financial activity to Islamic transactions and subsequently saw shares jump by over 22%.
This trend has seen the Islamic asset management industry explode; with not only existing players benefiting but mainstream conventional players surging into the market. Just this month leading UK Islamic bank Gatehouse announced further plans to partner with major international asset manager Threadneedle (which manages assets of around US$150 billion and recently acquired 2% of Gatehouse) to target the Islamic segment. “Given the outlook for high quality, well-managed and properly structured Shariah compliant investment products, we see considerable benefit in a partnership that we hope will last many years,” said Fahed Boodai, the chairman of Gatehouse.
The sector is expanding across the board, with leading index provider IdealRatings this month also launching the first Shariah compliant REITs index in Asia Pacific, which it plans to subsequently expand to cover the global REITS universe. “We are always looking to increase various asset classes for investment managers and we foresee a major growth in this asset class as fund managers begin to include the REITs sector in their portfolio,” said Mohamed Donia, CEO of IdealRatings.
There is no doubt that Islamic funds are moving towards their day in the sun, as economic indicators, investor sentiment and investment trends combine to create a perfect storm for the market. And with a number of bullish factors for the US market including low oil prices, healthy corporate balance sheets, an expected Federal Reserve rate hike and markets hitting all-time highs, the US market is also looking positive. “I can foresee that the growth of Islamic asset management will continue to be robust in the next decade,” confirmed Mohammad Shoaib, CEO of Pakistan’s Al Meezan Investment Management, to IFN. “We can certainly expect sizable increase in its market share in global finance.”
However, the need to grow and develop this market through education and awareness is still imperative. “The need still exists for asset managers to provide more products to the Muslim community; as overall they are high earners, highly educated, and committed to saving/investing money,” noted Monem Salam, the director of Saturna Capital Malaysia, to IFN.