Asia is still captivating investment managers globally despite the recent perceived economic slowdown and surging inflation in China. Since the global financial crisis, which saw the downfall of many developed economies in the west, the focus has now moved towards the emerging economies in the Asia Pacific region.
Asia Pacific (ex-Japan) has become a recognized economic powerhouse with a firm place in the global economic community. At meeting of finance ministers of the 21-member Asia Pacific Economic Cooperation forum last week, US Treasury Secretary Timothy Geithner urged the region to take steps to strengthen growth and fend off the pressures of the Eurozone crisis.
In further positive news for the region, at the recent 2011 Asian Pension Fund Roundtable Joseph Dear, the chief investment officer of the California Public Employees’ Retirement System, explained that public pension funds in the US and Canada are also increasingly looking to establish relationships in Asia to assist them in finding higher-yielding investments.
The problem seems to remain with the difficulty in attracting institutional investors – Islamic or conventional. Jahangir Aka, a senior executive officer at asset management firm SEI Investments, has warned the industry that poor sentiment in financial markets and lackluster interest among Islamic institutional investors will probably bring this year’s growth to a halt or even a decrease.
The perception that Islamic funds are exclusively for Islamic investors should be immediately addressed by fund managers in a bid to capture conventional investments into the Shariah space. Aka points out that pension and institutional funds in particular will be critical to the industry’s growth as they provide long-term, stable money.
Mahdzir Othman, CEO of i-VCap Management, believes that education is paramount in enticing conventional fund managers to diversify their portfolios to include Shariah compliant investments. Another advocate of this notion is Noripah Kamso, CEO of CIMB-Principal Islamic Asset Management. Her institution recently conducted a survey to obtain feedback from conventional institutional investors on their perception and understanding of investment in Shariah compliant funds.
Education aside, managers of Islamic investment funds must also look towards internationalizing the visibility and track record of their funds, Noripah said when speaking at the IFN forum. She explained that such a process was important as Islamic investment funds were currently very domestic-centric. She believes that by registering funds on global platforms such as Luxembourg and Dublin, fund managers will be able to exhibit their track record to international investors.
She exhorted the industry to look beyond its borders: “Don’t just come up with investment products which are very domestic-centric if you want to be a premium player in the premium league.”
The Islamic asset management industry has a more prudent investment process compared to conventional investments (due to its Shariah screening system) as well as better returns. With numerous signs and signals from investors seeking such criteria, fund managers must up their ante in marketing their funds and capabilities to attract these potential new clients. — RW