MANAMA: In 2014, Assets Under Management (AUM) of total global Islamic funds grew 5.3% from the previous year and the number of funds jumped by 11%, according to Thomson Reuters Global Islamic Asset Management Outlook Report.
The report, which released on the sidelines of the 11th Annual Edition of the World Islamic Funds and Financial Markets (WIFFMC) being held in Manama, said there were two very positive signs for the industry in 2014: the year saw the lowest number of liquidated funds since 2008 at US$127 million compared to US$315 million in 2013; and the total size of new funds launched increased to US$2.27 billion from US$1.52 billion in 2013, representing a 49% rise. Mutual funds dominated in 2014 with $53.17 billion making up 88% of total global Islamic funds mostly driven by diversification and liquidity.
The industry is heavily concentrated in core markets; it lacks scale and a middle ground
In 2014, 12 funds, each with AUM in excess of US$1 billion, made up 43% of total AUM while 50% of total AUM was held in funds smaller than US$10 million each. Islamic asset managers also highlighted the lack of available expertise, compliance with new regulations, investor’s confidence and market conditions as key challenges limiting investment scale and growth.
In 2014, 84% of total Islamic AUM was held in eight countries, with Saudi Arabia and Malaysia accounting for 69% of total AUM. Outside of Saudi Arabia and Malaysia, the industry continues to work within a largely unsupportive regulatory framework, suffering from a lack of government support and absence of clear Shariah-compliant investment avenues.
Outside of core markets Malaysia and Saudi Arabia, there are other growth pockets on the horizon for Islamic funds. Pakistan and Indonesia currently enjoy stable political climates and a renewal of efforts to expand and deepen their respective Islamic finance industries across all sectors. China is also opening up to Shariah-compliant funds – in 2014, Malaysian and Hong Kong asset managers started collaborating to market Islamic funds to China’s retail clients, with funds focused initially on the Far East and Southeast Asia.