Islamic finance industry 'facing challenges'
Dubai, October 4, 2011
Growth of the global Islamic asset management industry will likely halt or reverse this year as the industry struggles with poor sentiment in financial markets and lacklustre interest among Islamic institutional investors, said a finance expert.
Jahangir Aka, senior executive officer at asset management firm SEI Investments, said, "There may be some tentative buying of Islamic assets in 2012 as investors look to deploy capital that was kept on the sidelines as the global economy took a turn for the worse this year."
"But until there is more institutional interest in investing in Islamic mutual funds, growth will be modest," he pointed out.
Citing a recent report by Ernst & Young, Aka said Islamic funds' assets grew 7.6 per cent in 2010 to $58 billion, much slower than growth of 35 per cent experienced by conventional funds.
"The conventional funds benefited from stable inflows of new money related to pensions and US 401k investment plans - savings systems that generally have yet to be created in the Islamic world," he added.
Aka said there was a need to develop a deeper institutional investor base.
"We have a couple of big families, a supranational bank and a few Islamic banks. But none of them are major investors in the mutual fund market," he remarked.
Pension and institutional funds in particular will be critical to the industry's growth as they provide long-term, stable money, he said, but so far movement in that direction has been minor.
Islamic funds currently make up just 5.6 per cent of the nearly $1 trillion Islamic finance industry globally.-TradeArabia News Service