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Islamic asset managers 'need to boost services'

MANAMA, May 20, 2015

Almost 70 per cent of Middle Eastern wealth is transferred overseas, an expert has warned.

To attract this wealth, Islamic asset managers need to compete with institutions overseas by providing both attractive yields and a superior level of service quality and product customisation, said Thomson Reuters Middle East and North Africa managing director Nadim Najjar.

Key areas of opportunity available to the Islamic asset management industry include Islamic wealth management, private equity, crowd funding, sustainable investing, and socially-responsible investments, said Najjar after the findings of the company's "2015 Global Islamic Asset Management Outlook" were revealed yesterday at the World Islamic Funds and Financial Markets Conference (WIFFMC).

According to the study, Islamic funds are a $60 billion industry forecast to grow to at least $77 billion by 2019, while the latent demand for Islamic funds is projected to grow to $185 billion, said a report in the Gulf Daily News (GDN), our sister publication.

There are substantial growth opportunities but the industry will struggle to reach its potential in the near- to mid-term to bridge the $108 billion demand-supply gap.

The study is based on a survey of key asset managers, investors, and other market players such as regulators, consultants, and financial institutions.

Despite the financial crisis, the Arab Spring in the Middle East and North Africa region and the euro crisis, the majority of investors and asset managers still believe that performance and efficiency during the past five years remained the same or surpassed expectations.

Building on this momentum, most asset managers are willing to increase their Islamic investment holdings in the next 12 months.

Investors and asset managers chose the GCC as their preferred investment destination, with sukuks and equities being the preferred asset types for this year and next year.

Most asset managers have also highlighted a preference for a more supportive Sharia framework within their markets.

Islamic asset managers also highlighted the lack of available expertise, compliance with new regulations, investor confidence and market conditions as key challenges limiting investment scale and growth.

Thomson Reuters Global Head of Islamic Capital Markets Dr Sayd Farook, who spoke and participated in discussions at the conference, said the sector saw good growth last year which has since moderated into a steady one.

"The industry is heavily concentrated in core markets, lacks scale and a middle ground," he added.

Last year, assets under management (AUM) of total global Islamic funds grew 5.3 per cent from the previous year and the number of funds jumped by 11 per cent.

Additionally, there were two very positive signs for the industry in 2014.

The year saw the lowest number of liquidated funds since 2008 at $127 million compared with $315 million in 2013 and the total size of new funds launched increased to $2.27 billion from $1.52 billion in 2013, representing a 49 per cent rise.

Mutual funds dominated with $53.17 billion, making up 88 per cent of total global Islamic funds mostly driven by diversification and liquidity.

As much as 84 per cent of total Islamic AUM were held in eight countries, with Saudi Arabia and Malaysia accounting for 69 per cent of its total. - TradeArabia News Service




Tags: Middle East | manager | Islamic | asset | wealth |

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