By Farah Saad
With Malaysia chosen as its global Islamic finance hub, US-based Islamic investment management company Saturna Capital Corp plans to raise a fund of US$10 billion (about RM31.3 billion) by 2015 via its local unit Saturna Sdn Bhd. This is more than twice the size of the US$3.5 billion it has right now, but Saturna believes that given the current economic climate, the target is achievable.
Saturna Sdn Bhd director of Islamic Investing and deputy portfolio manager Monem Salam sees a shift in direction of the world’s funds, with capital moving away from the more traditional markets of the Middle East, the US and Europe, to a fast-growing Asia, and Malaysia will be in the middle of it all.
“The problems that are happening in the West right now are all systemic, they are not going to be resolved overnight. With Europe and the US having problems, the Middle East being too volatile, the only place for the money to flow to is Asia,” he told The Malaysian Reserve.
In 2003, Saturna group’s fund size stood at US$40 million, in 2008 that figure bloomed to US$1.4 billion, and as for 2011, the fund size stands at US$3.5 billion. Salam said Saturna chose Malaysia to be its global Islamic finance hub because of its experience in Islamic finance, its available manpower, and the government’s support in the form of initiatives.
Malaysia’s location and close proximity to other countries in the Asia-Pacific region also made it an attractive location, he added. Salam also said he is just as excited about Indonesia’s prospects as well, and has singled out the country as South-East Asia’s economy to watch.
“Population-wise, it is roughly the same size as the US. Then you take into consideration a growing middle class, as well as the growing number of people moving up from middle to upper-middle, and upper-middle to wealthy. That is a huge, huge market,” said Salam. Saturna recently secured a mandate from an Australian company, which will be managed from its offices in Kuala Lumpur. Saturna Capital, established in Bellingham, Washington, in 1989, claims to be the world’s second oldest Shariah income fund.
In 2010, the company bought Alpha Asset Management Sdn Bhd, and within two months converted all its investments to Islamic funds, while retaining its mainly non-Muslim clientele. In June 2010, the company was granted an Islamic fund management licence by the Securities Commission.
“The way that Saturna is run is a little different. Normally you would have conventional funds, run them through an Islamic filter to remove all the ‘sin stocks’ to get the Shariah-compliant fund, but what we do is that research is done first on an Islamic basis, then we build the fund from the bottom up. So far, the returns are proven, and Islamic funds have consistently outperformed conventional ones,” said Salam.
Islamic finance has grown by leaps and bounds over the past few years. Prior to 2008, Islamic finance was merely “an interesting thought”. “Now the challenge becomes growing assets and going up the economic ladder,” he said.
Islamic finance has expanded so much, that more often than not, there are new funds being launched promising innovation.
“The industry tends to focus on ‘what’s new’, so you get all these new products in the market when what the client really wants is a simple investment product that works,” Salam said.
(The Malaysian Reserve, 04 December 2011)
