Islamic assets under management (AUM) globally rose 2.5% last year*, driven above all by growth in Malaysia, according to AsianInvestor's latest annual list of the 50 biggest managers of sharia-compliant funds.

In fact, Malaysia will in 2017 overtake Saudi Arabia to account for the largest pool of Islamic funds, if last year's trend continues. Islamic assets managed in Malaysia grew 11.6% to $22.23 billion in 2016, putting the country only $1.87 billion behind Saudi Arabia, which recorded a 6.9% drop to $24.1 billion in the same period.

Together, the two countries accounted for around 70% of assets run by the 50 biggest Islamic fund managers (including pooled funds and segregated accounts), with 37.1% (Saudi Arabia) and 34.2% (Malaysia).

Meanwhile, Pakistan saw particularly impressive growth, with its sharia AUM doubling, albeit from a small base. It grew from $770.3 million in 2015 to $1.42 billion in 2016, giving the country a 2.2% share of our ranking's universe.

Public equity remains the largest sub-sector of Islamic funds, accounting for 34.5% of total AUM, up 2.2% compared to 2015. This marks a turnaround, given that these assets fell 16% year-on-year to 2015.

The AUM of funds invested in sukuk (so-called Islamic bonds) and money market instruments also rose during 2016. This sector ended the year at $27.73 billion, up 2.3% on 2015, as compared to a 4% drop in 2015.

However, Islamic alternative investments, including private equity, recorded a 9.9% fall to $5.89 billion in AUM. This equated to a 6.8% share of sharia AUM at the end of 2016 compared to 10.1% in 2015. Fund managers attributed the poor performance to volatile markets, with investors going long cash until fundamentals improve.

Saudi concerns

Saudi Arabia performed particularly poorly because of outflows from money market funds (MMFs). Combined, the country's sukuk and money market funds posted a $1.65 billion (11.24%) AUM drop in 2016.

Fund managers said this was thanks to retail investors being especially sensitive to falling oil prices, which bottomed out at the start of 2016, and the Kingdom’s national transformation programme: Saudi Vision 2030.

“There’s no doubt that 2015 and 2016 were tough years for the industry as a whole,” commented Zaheeruddin Khalid, chief investment officer at Jadwa Investment in Riyadh. “However, there was a turnaround in the fourth quarter of 2016, and there’ve recently been good inflows into public equities, in part because investors expect Saudi Arabia to be included in the global emerging market indices over the next couple of years.”

Malaysian moves

But for now industry innovations in Malaysia are having the biggest impact. Franklin Templeton’s former Malaysia head, Sandeep Singh, pointed to the impact of the Employee Provident Fund’s (EPF) move to establish a separate Islamic 'sleeve' in its portfolio, making it the first global pension fund to do so.

Moreover, Kwap, Malaysia's civil servants' retirement fund, is looking ultimately to make its entire portfolio sharia-compliant, as it emerged in July last year.

At the start of January, EPF said its members had taken up M$59.03 billion ($13.3 billion) of the initial M$100 billion fund allocated for Simpanan Shariah, the sharia-compliant portfolio run on segregated basis within the main pension fund. This is likely to have a progressively greater impact on AsianInvestor’s annual rankings since EPF hopes to increase the fund’s assets by about M$25 billion each year.

“Willis Towers Watson ranks [EPF] the world’s 14th largest pension fund,” said Singh, who became head of central/eastern Europe, the Middle East and Africa at Franklin Templeton in January. “So when they make a move like this, it has the potential to significantly alter the dynamics of the sharia-compliant industry.”

* The overall 2016 AUM figure was affected by an editorial decision concerning BlackRock. In 2015, the US asset manager said it had $21.1 billion in Islamic AUM, making it the world’s largest manager of such assets. However, this year it declined to provide a figure, so AsianInvestor took its publicly stated $429 million figure for its exchange-traded funds. On this basis, overall global Islamic AUM fell 22.8% to $64.83 billion last year. However, excluding BlackRock’s assets from the equation results in a 2.5% increase in sharia AUM during 2016.

 

The 50 biggest managers of Islamic assets 
Rank Company Country Total AUM (US$ million) YoY growth 2015 rank
1 NCB Capital Saudi Arabia 7,445.9 -10.2% 2
2 Public Mutual Malaysia 7,232.1 1.8% 3
3 Jadwa Asset Management Saudi Arabia 6,599.3 24.9% 4
4 CIMB Islamic Malaysia 4,890 3% 5
5 Samba Capital Saudi Arabia 3,137 -5.4% 6
6 Saturna Capital US 2,972 -8.6% 7
7 Maybank Asset Management Malaysia 2,953.6 44.7% 11
8 Asian Islamic Investment Management Malaysia 2,470 -16.6% 10
9 Absa Capital South Africa 2,086.3 3.8% 12
10 Al Rajhi Capital Saudi Arabia 2,023.5 -33.3% 8
11 AmInvest Malaysia 2,002 16.6% 14
12 Franklin Templeton Investments US 1,784.8 12% 15
13 HSBC Saudi Arabia Saudi Arabia 1,635 -30.9% 9
14 RHB Asset Management Malaysia 1,455 -37.2% 19
15 Eastspring Investments Singapore 1,367 16% 17
16 Oasis Crescent Management South Africa 1,3517 18.8% 18
17 BNP Paribas Investment Partners France 1,321.2 -13.3 16
18 Riyad Capital Saudi Arabia 1,315.9 -27.7% 13
19 ANB Invest Saudi Arabia 1,208 20.6% 21
20 Amundi Asset Management Singapore 1,083.9* 2.3%* 20
21 Al Meezan Investment Management Pakistan 914.1 44.9% 24
22 Al Rayan Investment Qatar 861.5 1% 22
23 Nomura Investment Management Japan 854.6 16.9% 23
24 Aberdeen Asset Management UK 657.2 8.1% 25
25 Rasmala Investment Bank UAE 458.6 23.7% 28
26 BlackRock/iShares+ UK/US 429 -98% 1
27 NBAD Asset Management UAE 418 95.8% 31
28 Alawwal Invest Company Saudi Arabia 394.3 6% 27
29 Falcom Financial Services Saudi Arabia 344.8 -17% 26
30 Manulife Asset Management US 341 -5.2% 30
31 NBP Fullerton Asset Management Pakistan 331.4 151.8% 39
32 Markaz Kuwait 307.3 -16.6% 29
33 i-VCap Management Malaysia 290.9 -1.7% -
34 Kenanga Investors Malaysia 236.5 174.4% 42
35 Alfalah GHP Investment Pakistan 178.9 2,227% -
36 Amana Mutual  Malaysia 176.2 -4.1% 33
37 Global Investment House Kuwait 157.6 14.1% 37
38 National Investments Company Kuwait 131.9 -37.4% 32
39 Mandiri Investasi Indonesia 123.5 -24.4% 35
40 Hong Leong Asset Management Malaysia 115.3 -31.8% 34
41 Tata Asset Management India 78.2 6.7% 47
42 Allied Asset Advisors US 75.0 0% 45
43 Kagiso Management South Africa 73.1 -3% 44
44 Al Hilal Bank UAE 72.8 - -
45 Amanahraya Investment Management Malaysia 70.2 107.1% -
46 Trimegah Asset Management Indonesia 67.4 -23.9% 46
47 PMB Investment Malaysia 66.7 24.5% 48
48 Pacific Mutual Fund Malaysia 64.7 -51.3% 38
49 TA Investment Management Malaysia 57.9 18.6% 50
50 Libra Invest Malaysia 57.1 49.1% -

*Estimated figure
+BlackRock declined to offer an estimate of its sharia-compliant AUM this year, so AsianInvestor used its last publicly announced figure of sharia-compliant exchange-traded funds, from August 2016.