HSBC has launched a suite of securities services for Islamic fund managers in a bid to expand its 10% share of the $50 billion–$60 billion in sharia-compliant funds under management globally, a market that has seen minimal growth since the end of 2009.
HSBC Amanah Securities Services offers fund accounting and administration, global custody, transfer agency, banking and treasury services in 17 markets in the Middle East, Asia-Pacific, Europe and the Americas.
The services are available to both Islamic investment managers and traditional fund managers running sharia-compliant funds, with administration and custody undertaken by the bank’s securities services division. The unit utilises the expertise and sharia-compliant products of its Islamic financial services unit, HSBC Amanah.
The bank, which had provided locally implemented Islamic services that varied by location, is rolling out a suite of services globally that have been certified by sharia scholars, says Germain Birgen, head of HSBC Amanah Securities Services.
“We saw a lack of standardised and harmonised products in the market,” says Birgen, owing to different interpretations of sharia law across different countries and cultures.
The bank hopes that providing a unified suite of sharia-certified securities services worldwide could help it expand its share of global Islamic funds under management.
Since the securities services division started on the project almost two years ago, “initial demand had been very stable”, says Birgen. “But over the last three to six months, new requests have been coming in, and from managers overseeing larger amounts of assets.”
The bank says it is seeing more interest coming from Islamic fund managers registered in Hong Kong, Ireland, Luxembourg and Singapore that are seeking an international investor base, says Birgen. Its existing clients are typically based in Indonesia, Malaysia or Saudi Arabia.
HSBC Amanah Securities Services targets a client range that covers asset managers, pension funds, private equity, insurance, sovereign wealth funds and family offices.
The global Islamic finance sector as a whole is valued at $1 trillion, according to the Manila-based Asian Development Bank. But the Islamic funds market stands at around 5% of that figure, and has been fairly static since the end of 2009, according to the Islamic Funds and Investments Report 2010 published in September by Ernst & Young. That said, the pool of Islamic investable assets has continued to grow, it adds.
Sharia fund managers face various issues, including a lack of depth in certain markets in terms of sourceable investments (particularly sukuk or so-called Islamic bonds), the sector's relatively short performance track records, and the difficulties in attracting experienced asset managers to sharia asset hubs such as Malaysia and the Middle East (see AsianInvestor, November 2010, pages 24-25).