Monday, September 9, 2013

Experts: Islamic funds more resilient during financial crisis

by Sathish Govind   

The financial crisis has proven the Islamic fund management industry to be far more resilient and much safer for investors then its conventional counterpart due to the lack of exposure to conventional banks, director of Amanie Advisors Sdn Bhd, a leading firm specialising in Islamic Solutions, Baiza Bain told The Malaysian Reserve recently.
Amanie's BAIZA

“As a result during the global financial crisis, almost all Islamic funds outperformed their conventional counterpart which in itself is proof of its sound investment practice,” Baiza said.

He added that the crisis thus has attracted more Muslims and non-Muslims into the industry which now understand the hazards of the conventional financial system.

Chief executive officer and executive director of Asian Islamic Management Sdn Bhd Akmal Hassan agrees and adds that there is sufficient proof that Islamic fund management had shown to be far more resilient especially during the financial crisis.

“As an example, the fund size of Hwang AIIMAN Growth Fund (AGF), a fund launched by Hwang Investment Management Bhd has grown from RM36.128 million in the year 2007 to RM88.32 million as at Jan 31, 2012” “AGF has been consistent in declaring income distributions since its inception on October 2002 and has also proven to be a sound option for investors seeking capital growth and those who have remained since inception have seen capital growth of 244.63%,” Akmal said.

Akmal further adds that there will be exponential growth in the sector especially in the next few years due to an increasing number of high net growth individuals around the world and growing interest from developing and emerging economies.

“Countries such a as Japan, South Korea, Brunei, Indonesia, Australia, Singapore are countries that are looking to expand their offerings, create more value and push for greater transparency from Islamic sources, he added.

At present globally, the Islamic fund management assets represent 4.5% of the total Islamic finance assets. The total estimated assets under management is US$60 billion (RM183 billion). Rate of the industry growth for the past decade has been estimated at 15% per annum.

Enumerating some of the differences and advantages of Islamic fund management compared to the conventional system, Akmal said the Shariah-compliant investments allow for profit sharing through prearranged agreement in sharing risk and returns and prohibits the payment or acceptance of interest fees.

Akmal added that Islamic fund management offers greater transparency, lower risks to promote stability and meets the ethical and faith based needs

On some of the challenges facing the industry, Baiza said that for the industry to grow at a faster rate there is a need of standardisation of the Islamic fund management industry on a global scale as it is now fragmented and focused on a few countries.

On some of the trends in the industry, Akmal said that he foresees more Islamic investment players entering the local market as it is gaining reputation as an Islamic financial hub in the Asean region.

He added this will translate into more diverse and sophisticated Shariah-compliant funds being developed here and exported to the Middle East and emerging regions due to the growing affluence of these nations that calls for better need for wealth management of product and services.

The Securities Commission (SC) had said that under the Capital Masterplan 2, the size of the Malaysian Islamic capital market is projected to expand at an average 10.6% per annum over the next 10 years to RM2.9 trillion by 2020.

The SC added that 2011 continued to be a good year for the Islamic capital market globally, especially the sukuk segment. The total value of sukuk issued globally in 2011 amounted to US$92 billion, representing a 68% increase, year-on-year.

Malaysia remains at the forefront of the sukuk market, accounting for 73% or US$67 billion of the total sukuk issued.

Malaysia is also the domicile for 68% of the US$210 billion total sukuk outstanding globally as at end-2011.