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aDDressInG mIscOnceptIOns
malaysia and other islamic financial hubs have attracted an impressive list of fund managers over a relatively short timeframe. Unlike conventional products, islamic funds are encumbered by a series of myths and misconceptions. many investors believe erroneously that products are only relevant to muslims; that these funds are overly complicated, and that they suffer a performance drag compared to conventional funds. there is still a widespread belief that the islamic fund space is by nature a restricted universe. the key to addressing the misconceptions surrounding islamic funds is to educate the wider investing public, says noripah Kamso, ceo of malaysia-based cimB-Principal islamic asset management, an islamic fund management company (ifmc)-licensed institution under the mifc initiative. islamic fund management targets all investors, irrespective of their religion. since the features of the islamic products grant social justice to mankind, it actually appeals to both muslims and non-muslims. We have an investment fund in asia-Pacific excluding Japan that we have sold in indonesia and 70% of the investors are non-muslims, says ms noripah. this message is underlined by the experience of fund managers outside the
the past few years has seen a focus on InnovatIon wIthIn the IslamIc fInance space through the development of etfs
showcase the track record of islamic asset management. this would ensure that we are in the lipper database, giving a global showcasing of our track record to the extent that institutional investors will be keen to come in.
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market revOlutIOn
the past few years has seen a focus on innovation within the islamic fund space, through the development of etfs. these index funds have the advantage of offering cheaper access to the market with exposure to a basket of underlying assets at relatively lower cost. BnP Paribas investment Partners has listed its first sharia-compliant etf in 2007 in switzerland and france, and is preparing to list a second islamic etf in malaysia. this etf is domiciled in france, Ucits [the Undertakings for collective investment in transferable securities] iii-compliant and Us dollar denominated. ms chin-sharpe says: By bringing new etfs to the market, we will offer an opportunity for investors to invest in instruments that can be used for strategic asset allocation. it will help investors to access markets which may be costly to invest into or where they may not have resources to do so for their own asset allocation or diversification strategy. BnP Paribas investment Partners new etf will track some of the largest shariacompliant chinese companies listed on the Hong Kong stock exchange and will cover sectors such as telecommunications, oil and gas, consumer goods and utilities. etfs have made a smooth transition to the islamic fund space. most index providers have put into place sharia stocks screening methodologies, approved by their sharia boards and these are mostly recognised by investors. such methodologies allows us as fund managers to develop shariacompliant instruments or portfolio such as etfs. our in-house sharia advisory council also ensures that the management of these funds is compliant with sharia guidelines, says ms chin-sharpe. as the islamic fund space matures, it will look to capture the institutional investors, the sovereign wealth funds and pension funds. With a track record and a transparent way of displaying islamic funds success, islamic fund managers will have the ammunition to confound the sceptics and underline the investment potential of a sector that is now reaching its full potential.
*To read the full Q&A article, visit www.mifc. com/viewpointsShapingIslmcF
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In August 2006, the Malaysia International Islamic Financial Centre (MIFC) initiative was launched to position Malaysia as a hub for international Islamic finance. The MIFC initiative comprises a community network of the countrys financial and market regulators, including Bank Negara Malaysia (Central Bank of Malaysia), Securities Commission Malaysia, Labuan Financial Services Authority and Bursa Malaysia (Kuala Lumpur Stock Exchange); Government ministries and agencies together with industry participation from the banking, takaful, capital market institutions, human capital development institutions and professional services companies which are participating and working collaboratively in the field of Islamic finance. The MIFC initiative is supported by global legal, regulatory and sharia best practices that enable industry practitioners to conduct international business in Islamic finance in the areas of Islamic capital market, Islamic fund and wealth management, international Islamic banking, international takaful and human capital development, while enjoying attractive incentives. Through the Shaping Islamic Finance Together brand proposition, Malaysia welcomes global talents, leading players, issuers and investors to shape the future of Islamic finance together through the MIFC initiative, leveraging on and benefiting from Malaysias more than 30 years of experience in Islamic finance, in an environment of innovation and thought leadership.
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fund significantly outperformed its benchmark in 2008 when the market was going down quite rapidly. the s&P was down by about 39% that year and the amanah income fund was only down about 23%. and we have seen a lot of money flow into the funds. We have doubled every year for the past three years, says mr salam. islamic fund managers are now diversifying into new asset classes to improve performance and better match investors needs. the prize is an estimated $360bn to $480bn of individual and institutional savings that are potentially available to the islamic fund management industry, according to ernst & young. extending the visibility of islamic funds is key to capturing this opportunity. We need to undertake a global education with all investors, to ensure that we extend the range of products. the existing product range itself is not small there are 600 sharia-compliant products globally already in the market. it just looks small compared to the 63,000 conventional mutual fund products globally, says ms noripah. islamic fund managers are now developing products that better reflect the shifting nature of investor needs. ms noripah says: We are exploring the creation of globally acceptable products as well as a strong marketing and distribution platform by working with global offshore fund platforms like Dublin or luxembourg, to