The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
The two financial institutions û India-based Reliance Asset Management and Kuwait-based Global Investment House û join three other international Islamic fund managers already licensed by the Securities Commission. The first three to get their foot on the ground were Kuwait Finance House (Malaysia), DBS Asset Management and CIMB Principal Islamic Asset Management.
The Securities Commission is reviewing applications by other international financial institutions applying for Islamic fund management licenses, without elaborating on whoÆs waiting in the wings for approval.
ôThe SC has been actively involved in establishing the framework as well as engaging with international fund managers and leading financial institutions to establish their Islamic fund management operations in Malaysia,ö says Securities Commission chairman DatoÆ Sri Zarinah Anwar. ôWe are confident that these efforts will see positive growth in sharia-compliant funds being managed in Malaysia, in tandem with the overall initiative to make Malaysia a global centre for Islamic fund management.ö
In granting the approval, the Securities Commission considered, among other things, the scope of operations that will be established by the two Islamic fund management companies in Malaysia, their fund management and banking experience, brand value, expertise in various markets, geographical presence, and compliance and risk management capabilities.
Reliance Capital Asset Management is IndiaÆs largest asset management company in terms of assets under management and manages funds launched by Reliance Mutual Fund, the largest mutual fund house in India.
Global Investment House is a leading asset management and investment banking company with a wide distribution network encompassing 16 countries across the Gulf Cooperation Council (GCC), the Middle East and North Africa (Mena) region, and other emerging markets.
The Malaysia government allows 100% foreign ownership of Islamic fund management companies, in line with its bid to attract more key fund players to the country. The incentive is part of ongoing liberalisation measures in MalaysiaÆs capital market as well as being aimed at complementing the broader Malaysian International Islamic Finance Centre (MIFC) initiatives of positioning the country as an international Islamic financial hub.
Islamic fund management companies are allowed to invest all their assets overseas and will be given income tax exemption on fees received until 2016. They will also be able to tap into M$7 billion ($2.1 billion) in seed money from the Employees Provident Fund, the national pension fund for the private sector in Malaysia. Tax incentives are also being offered to existing stockbrokers that will set up Islamic subsidiaries.
Fund management companies are hungry for a portion of the wealth of the Islamic community û especially those communities in the oil-rich Middle East û and Malaysia is creating the platform for them to be able to do just that. The opportunities are vast. The worldÆs Muslim population is estimated at around 1.5 billion, thatÆs around 22% of the worldÆs 6.7 billion population.
There are more than $202 billion in Islamic bank deposits worldwide growing by around 10% to 20% annually and around 300 Islamic financial institutions with assets of more than $560 billion, according to industry estimates. In contrast, there are only around 500 sharia-complaint funds worldwide, with total assets worth $300 million.
Islamic fund management is expected to sustain the growth of MalaysiaÆs asset management industry. Other countries in Asia are attempting to be an Islamic hub of sorts, either in banking or asset management. Malaysia is ahead of the pack in Asia and other markets in terms of manufacturing Islamic funds and this is among its main attraction for fund houses that want to set up shop there. The industry is still growing at a considerable pace and demand for unit trust products continues to be strong.
Mega players Nippon Life and Dai-ichi Life are looking for opportunities in higher-yield single-A US corporate bonds, which offer more appealing yields than stagnant domestic offerings.
The “lower for longer” monetary policy and stimulus packages, coupled with the rolling out of vaccine programmes favorably support real estate investing in the region, with offices and data centres presenting forward-looking opportunities.
As US fixed income default rates rose and yields fell during the pandemic, are Asian bonds, which have had more stable yields through 2020, looking more attractive?
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