Islamic Asset Management sector has potential to grow

DUBAI The Islamic fund industry manages about $46 billion, which in the context of the total global asset management figure, which stands at $60 trillion according to Thomson Reuters, is minuscule. If the Islamic asset industry were to tap just one per cent of the total global asset management, it would mean Dh600 billion, which would represent a massive boost to the relatively nascent industry. But can this be a possibility in the years ahead?

That was the question posed to the panelists at the first Global Islamic Economy Summit 2013. They suggested that there are few issues, both within and without, that needs be addressed for the Islamic asset management and investments to grow in the post global financial crisis period.

Performance of the funds is key to bringing in clients, both institutional and retail.

The performance of these products and their track record is important, said the Hasan Al Jabri, chief executive of SEDCO Capital. The Saudi based asset manager and provider of Sharia compliant investment solutions.

Monem A. Salam, president of Saturna Capital, based in Malaysia, and which has $4 billion assets under management and is retail, said that unlike performance at an institutional level, which is relative performance to an index, the investors here just want to make money and not lose any.

In a region, such as the GCC, where retail component is extremely small, funds have to ensure whether they are capturing all the sectors in the market, said Al Jabri. For example, sovereign wealth funds, pension funds etc. Less than one per cent of the total population invest in mutual funds in a Saudi Arabia, for example. Also, savings ratio in Muslim countries is low and awareness of mutual funds among retail groups is very low.

“We may have from some of the countries but then it may differ from some of the other countries,” he said. “What I see there is a lot of potential—if we do the right strategies, right performance, to secure support from the sovereign funds and pension funds and the governments, the sector may grow substantially.”

“If you are going after retail market you have to be a consistent performer,” said Salam.

But he also emphasised on marketing, getting out the product to the people. And finally, “you have to be with the audiences—or where investors are.”

In this regard, Saudi-based Jadwa Investments’ chief executive Ahmed Al Khateeb struck a note of disappointment with some of the other players.

While he is pleased with what is going on Saudi Arabia and Malaysia, which are among the top three in Islamic asset management, he said “I am not really happy with level of activities of banks, institutions and regulators are doing to support the industry. We can do much, much more to increase the number.”