Saudi tops GCC Islamic funds market
Dubai, November 19, 2013
Saudi Arabia is the second largest market for Islamic funds globally with Assets Under Management (AUMs) exceeding $6 billion, according to a new study.
The Kingdom accounts for 20 per cent of the global Islamic funds market, said Thomson Reuters, the leading provider of intelligent information for businesses and professionals.
Earlier this year, Thomson Reuters launched the global Islamic asset management survey to gather market consensus on the state and direction of the global Islamic asset management sector.
The "Global Islamic Asset Management Report 2014," prepared by Thomson Reuters in collaboration with Lipper, targeted both investors and asset managers in order to present a fuller picture of the Islamic asset management space.
The report provides unique insights into the development of the sector, highlighting key milestones reached this year, critical challenges to growth, as well as proposed solutions to further develop the Islamic asset management sector.
Russell Haworth, the managing director, Mena, Thomson Reuters, said: “The Islamic asset management space continues to lag behind in terms of growth compared to Islamic banking. We are committed to building greater insight and analysis of the Islamic Finance sector overall, and Shar’iah complaint asset management is a critical component of that industry."
"This year’s report will act as an important benchmark for the industry as it continues to grow," added Haworth.
The key findings in the report are as follows:
•Saudi Arabia is also the second largest hub for Islamic funds with over 163 domiciled funds
•The number of funds has doubled since 2007 to 786 globally
•2013 saw the highest number of fund launches in four years; 20 per cent of issuances were in Gulf countries, mainly due to a large number of Saudi funds launched during the year
•Assets under management (AUM) of global funds stand at just over $62 billion, with mutual funds accounting for the bulk of this amount, with over $46 billion
•However, AUMs have only increased marginally over the last few years, and declined by 1.7 per cent in 2013
•The sector is primarily retail driven, with only 20 per cent of AUMs derived from institutional investors
•The underdevelopment of takaful operators and pension funds in Islamic countries has a knock-on effect on the Islamic asset management space
Among other things, the study also found that compulsory registration and preceding authorization of Islamic funds with the capital market authority in Saudi has led to smaller asset managers exiting the market.
Dr Sayd Farook, the global head of Islamic Capital Markets for Thomson Reuters, said: “Attracting institutional investors is seen a key requirement for the growth and long-term sustainability of the Islamic asset management industry. Despites the lack of institutional participation, we see positive signs, such as the development of pension assets in Islamic countries."
Dr Farook said the GCC pension assets were likely to hit $180 billion. "Attracting a small portion of these could significantly increase assets under management for Islamic asset managers," he stated.
According to him, Saudi Arabia was a step ahead of other GCC countries as asset managers adopt innovative strategies to increase their investor base.
"For example, this year Sedco Capital is coming out with their first Islamic fund that will be compatible with socially responsible investment parameters. The fund will have environmental, social and corporate governance principals incorporated into the fund investment strategy, broadening its appeal to a new range of investors," he added.
The full report will be launched at the two-day Global Islamic Economy Summit, organised by Thomson Reuters and the Dubai Chamber of Commerce & Industry, on November 25 in Dubai.-TradeArabia News Service