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.
Last month, MalaysiaÆs Securities Commission issued its first batch of Islamic fund management licences to Kuwait Finance House, DBS Bank and CIMB Principal.
ôWe hope to announce the next batch of licencees shortly,ö says Zarinah Anwar, chairman of MalaysiaÆs Securities Commission. ôI am heartened by the strong response we have had and the quality of the names that have been engaging with us. Many of these firms are looking towards making Malaysia their global centre of excellence when it comes to Islamic fund management.ö
Zarinah made the comments at the three-day Malaysian Islamic Finance Issuers & Investors Forum 2008 that ended Wednesday.
ôI believe the presence of the international Islamic fund management companies together with the five global fund management companies already established under an earlier liberalisation scheme, as well as some of our own major firms will help drive the growth and vibrancy of the industry in Malaysia,ö Zarinah says.
Aberdeen Asset Management was the first to be allowed by regulators to set up operations in Kuala Lumpur to manage portfolios for institutional clients in 2005. That made Aberdeen, through its Aberdeen Asset Management Sendirian Berhad entity in Malaysia, the first foreign fund manager to have a presence in Malaysia in eight years. The four other foreign fund houses that have since set up fully owned operations in Malaysia are Nomura Asset Management, BNP Paribas Asset Management, Credit Agricole Asset Management, and Franklin Templeton Investments.
The government is allowing Islamic fund management companies to be 100%-owned by foreigners. Islamic fund management companies will be 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 RM7 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.
ôThe investment management industry is the fastest growing segment of our capital market with cumulative growth rates of 24% per annum,ö Zarinah says.
She notes that this growth is expected to strengthen even further on the back of deregulatory and liberalisation measures which Malaysia has introduced, including the establishment of a more facilitative regime for investment product approvals, the easing of restrictions on investments abroad, and liberalised rules for the establishment of foreign fund management companies.
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. Sharia-compliant unit trust funds have so far produced sales totalling RM2.96 billion ($889 million) this year, a growth of 84% compared to the whole of 2007. That growth is sharply higher than 11% growth in net sales for conventional products over the same period.
The strong growth is a reflection of the increasing innovation capabilities in the Malaysian industry, Zarinah says. Many of the recent product offerings include features of capital protection with only a portion invested in structured products like swaps, options and hedging instruments for a wide range of underlying assets including currencies as well as commodities.
ôThis development seems to suggest that irrespective of overall market conditions, there are opportunities for market intermediaries to innovate and cater to investor appetite for products with sufficient risk mitigation features,ö she says.
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