Sharia-compliant investing has been steadily on the rise in recent years but suffered a setback in 2015, according to AsianInvestor’s list of the 50 biggest Islamic asset managers in this segment (see tables below*).

This came amid a tricky investment environment last year, most notably the flight from emerging-market assets, with global managers seeing outflows in Asia, for instance. Moreover, the oil price collapse over the past 18 months or so has had a particularly big impact on sentiment in the Middle East, one of the biggest pools of sharia-compliant assets.

Declining 12.2% to $84 billion, Islamic assets under management (including pooled funds and segregated accounts) ended last year a little below where they stood at the end of 2013.

The biggest contributor to the fall was a 16% drop in sharia public equity investments to $26.8 billion. Likewise, sukuk and sharia-compliant money-market AUM fell 4% to $23.4 billion after healthy growth in recent years.

A bright spot in 2015 was Islamic alternative assets posting a slight rise to $8.47 billion and accounting for 10.1% of total sharia AUM as of end-2015, up from 8.7% the year before. This is a trend that industry participants expect to continue, again in line with increasing demand for alternative investment across the board globally.

(Note: the overall AUM figures broken out for the different asset classes do not tally with the overall AUM total because not all firms were prepared to break out figures by asset class.)

Flighty retail investors were seen as the main reason for sharia asset outflows, particularly in the Middle East, where the oil price collapse – from $115 a barrel in June 2014 to below $30 at one point this year – has had a significant impact on sentiment. Other factors adding to investor uncertainty were intensifying conflict in the region and planned reforms in conservative Saudi Arabia by the new ruling regime.

Institutions were less inclined to panic and in any case some have strategic, mandated allocations to Islamic investments. Indeed, industry participants point to a number of developments that bode well for institutional – and retail – investment in sharia strategies.

For one thing, sovereign wealth funds do not tend to have sharia components in their portfolios, but asset managers feel it is only a matter of time before they do. As Islamic strategies build longer track records, their managers will find it much easier to attract money from both institutional investors and distributors.

Furthermore, sharia products may have greater appeal in light of the major financial crises that have occurred in recent years. Islamic funds effectively act as stabilisers in portfolio construction since they tend to provide a cushion in the event of a crisis, said Ahmad Najib Nazlan, chief executive of Maybank Islamic Asset Management in Kuala Lumpur.

He explained that there were three basic conditions of Islamic finance that may prevent the two main causes of financial crises – excessive leverage and formation of speculative bubbles in credit markets. Under sharia law, transactions have to be based on real rather than notional assets. The seller must be in possession of the physical asset and the transaction must be genuine, with full intention to give and take delivery.

Sharia interpretation
However, there remain issues around different scholars’ interpretation of sharia, which could hold back the development of Islamic funds and particularly the cross-fertilisation of strategies between the Middle East and east Asia, the two biggest pools of Islamic assets. The sharia screening criteria used in the Middle East is generally more stringent than that in Malaysia.

While both Middle Eastern and east Asian approaches allow companies with a high cash ratio to be considered sharia-compliant, different financial ratios are used.

In Malaysia, the ratio is calculated relative to the total asset value of the company, whereas in the Middle East it is based on market capitalisation. This means companies with a higher level of debt can be deemed sharia-compliant in Malaysia. It also means that a company’s sharia-compliant status may vary in the Middle East depending on stock price movements.

Moreover, in Malaysia, sharia-compliant borrowings and cash deposits are excluded from cash and debt ratio calculations, whereas in Middle East they are not.

Meanwhile, in respect of sukuk, investors in the Middle East generally require them to be secured by assets, but this is not the case in Malaysia.

*Tables compiled by Bernice Cornforth. The full feature appears in the latest (March 2016) issue of AsianInvestor.

The top 50 managers of sharia assets by total AUM
2015 2014 Company Geography Total AUM
($ million)
Total
2014
%
change
1 1 BlackRock/iShares UK/US 2,110.0 26,600.0 -20.7%
2 5 NCB Capital Saudi Arabia 8,290.0 8,303.5 -0.2%
3 2 Public Mutual Malaysia 7,193.7 8,027.1 -10.4%
4 4 Jadwa Asset Management Saudi Arabia 5,282.8 5,065.0 +4.3%
5 3 CIMB Islamic Malaysia 4,747.4 6,001.64 -20.9%
6 8 Samba Capital Saudi Arabia 3,316.0 3,598.0 -7.8%
7 6 Saturna Capital United States 3,251.0 3,881.0 -16.2%
8 9 Al Rajhi Capital Saudi Arabia 3,032.9 3,138.0 -3.4%
9 7 HSBC (Saudi Arabia) Saudi Arabia 3,467.0 3,703.0 -36.1%
10 12 Asian Islamic
Investment Management
Malaysia 2,118.3 2,155.6 -1.7%
11 14 Maybank Asset
Management
Malaysia 2,040.8 1,810.2 +12.7%
12 10 Absa Capital South Africa 2,009.2 3,079.2 -34.7%
13 11 Riyad Capital Saudi Arabia 1,819.1 2,265.4 -19.7%
14 13 AmInvest Malaysia 1,717.0 1,896.0 -9.4%
15 19 Franklin Templeton
Investments
US/
Malaysia
1,593.0 1,236.0 +28.9%
16 15 BNP Paribas
Investment Partners
France/
Malaysia
1,524.6 1,586.9 -3.9%
17 18 Eastspring Investments Singapore 1,346.0 1,334.0 +0.9%
18 17 Oasis Crescent
Management
South Africa 1,138.3 1,476.7 -22.9%
19 16 RHB Asset Management Malaysia 1,060.5 1,562.4 -32.1%
20 20 Amundi  France/
Singapore
1,060.0 1,063.0 -0.3%
21 22 ANB Invest Saudi Arabia 1,001.4 825.7 +21.3%
22 21 Al Rayan Investment Qatar 853.2 833.8 +2.3%
23 23 Nomura Asset
Management
Japan/Malaysia 731.0 732.0 -0.1%
24 25 Al Meezan Investment
Management
Pakistan 631.0 569.0 +10.9%
25 26 Aberdeen Asset
Management
UK/Malaysia 607.8 565.0 +7.6%
26 24 Falcom Financial
Services
Saudi Arabia 415.4 609.0 -31.8%
27 28 Saudi Hollandi Capital Saudi Arabia 372.0 323.2 +15.1%
28 31 Rasmala Investment Bank UAE 370.9 237.7 +56.0%
29 26 Kuwait Financial Center Kuwait 368.5 457.6 -19.5%
30 27 Manulife Asset
Management
Canada/Malaysia 359.7 416 -13.5%
31 29 NBAD Asset Management UAE 213.5 261.1 -18.2%
32 30 National Investments
Company
Kuwait 210.6 253.4 -16.9%
33 32 Amanah Mutual Malaysia 183.7 206.1 -10.9%
34 38 Hong Leong Asset
Management
Malaysia 169.0 102.5 +64.9%
35 33 Mandiri Investasi Indonesia 163.4 193.8 -15.7%
36 37 BLME UK 154.1 145.6 +5.8%
37 36 Global Investment House Kuwait 138.2 151.2 -8.6%
38 35 Pacific Mutual Fund Malaysia 133.0 155.0 -14.2%
39 - NBP Fullerton Asset
Management
Pakistan 131.6 63.7 +106.7%
40 34 Comgest Growth France 123.1 158.3 -22.3%
41 40 Al Dar Asset
Management
Kuwait 89.6 94.4 -5.0%
42 42 Kenanga Investors Malaysia 86.2 81.3 +6.0%
43 46 Schroder Investment
Management
UK 76.8 59.0 +30.1%
44 39 Kagiso Asset
Management
South Africa 75.4 100.2 -24.8%
45 45 Allied Asset Advisors United States 75.0 65.0 +15.4%
46 41 Trimegah Asset
Management
Indonesia 73.7 91.0 -19.0%
47 59 Tata Asset
Management
India 73.3 3.5 +2,017.6%
48 48 PMB Investment Malaysia 53.6 49.6 +8.0%
49 43 Samuel Asset Manajemen Indonesia 50.2 75.4 -33.4%
50 44 TA Investment
Management
Malaysia 48.8 67.0 -27.3%

 

Managers of sharia funds ranked by public equity assets (including balance funds)
2015 2014 Company Geography Total
($ million)
Total
2014
%
change
1 1 Public Mutual Malaysia 6,182.1 6,551.4 -5.6%
2 3 Saturna Capital United States 3,204.0 3,710.4 -13.6%
3 2 CIMB Islamic Malaysia 3,162.0 3,995.6 -20.9%
4 4 Jadwa Asset Management Saudi Arabia 2,934.1 3,060.0 -4.1%
5 5 HSBC (Saudi Arabia) Saudi Arabia 1,094.1 1,338.2 -18.2%
6 6 Oasis Crescent
Management
South Africa 973.0 3,045.0 -68.0%
7 8 Samba Capital Saudi Arabia 744.8 894.0 -16.7%
9 10 Al Rayan Investment Qatar 698.0 720.3 -3.1%
10 12 Eastspring Investments Singapore 669.0 589.0 +13.6%
11 13 Aberdeen Asset
Management
UK/Malaysia 607.8 565.0 +7.6%
12 17 Franklin Templeton
Investments
US/Malaysia 557.9 454.0 +22.9%
13 14 Amundi  France/Singapore 530.0 555.0 -4.5%
14 7 Riyad Capital Saudi Arabia 520.9 951.6 -45.3%
15 11 BNP Paribas
Investment Partners
France/Malaysia 505.7 635.6 -20.4%
16 15 Nomura Asset
Management
Japan/Malaysia 488.2 533.0 -8.4%
17 16 AmInvest Malaysia 450.0 510.0 -11.8%
18 21 Al Meezan Investment
Management
Pakistan 363.9 256.0 +42.1%
19 18 Manulife Asset
Management
Canada/Malaysia 292.6 323.0 -9.4%
21 22 National Investments
Company
Kuwait 210.6 253.4 -16.9%
22 19 Asian Islamic
Investment Management
Malaysia 160.9 311.4 -48.3%
23 24 Global Investment House Kuwait 138.2 151.2 -8.6%
24 26 Falcom Financial
Services
Saudi Arabia 132.2 130.3 +1.5%
25 23 Comgest Growth France 123.1 158.3 -22.3%
26 25 ANB Invest Saudi Arabia 104.4 144.6 -27.8%
27 27 Mandiri Investasi Indonesia 96.1 105.5 -8.9%
28 29 Pacific Mutual Fund Malaysia 93.0 81.9 +13.6%
29 32 Saudi Hollandi Capital Saudi Arabia 91.0 67.3 +35.2%
30 31 Kagiso Asset
Management
South Africa 75.4 73.7 +2.2%
31 33 Allied Asset Advisors United States 75.0 65.0 +15.4%
32 28 Trimegah Asset
Management
Indonesia 73.7 91.0 -19.0%
33 45 Tata Asset
Management
India 73.3 3.5 +2,017.6%
34 42 RHB Asset Management Malaysia 67.1 15.6 +329.4%
35 35 Kenanga Investors Malaysia 65.0 55.6 +17.0%
36 30 NBAD Asset Management UAE 63.4 81.4 -22.2%
37 34 Maybank Asset
Management
Malaysia 54.9 58.3 -5.7%
38 37 PMB Investment Malaysia 53.6 49.6 +8.0%
39 39 Schroder Investment
Management
UK 45.4 37.5 +21.0%
40 36 Kuwait Financial Center Kuwait 41.8 52.9 -21.1%
41 40 Rasmala Investment Bank UAE 24.3 22.5 +8.2%
42 43 Samuel Asset Manajemen Indonesia 24.0 48.4 -50.4%
43 41 Amanah Mutual Malaysia 12.3 21.3 -42.0%
44 44 TA Investment
Management
Malaysia 12.3 - -
45 43 Al Dar Asset
Management
Kuwait 6.7 7.8 -14.5%
46 44 Hong Leong Asset
Management
Malaysia 4.1 6.1 -33.2%
47 46 Absa Capital South Africa 1.7 2.6 -36.1%

 

Managers of sharia funds ranked by sukuk/money-market assets
2015 2014 Company Geography Total
($ million)
Total
2014
%
change
1 1 NCB Capital Saudi Arabia 7,263.3 7,156.9 +1.5%
2 2 Al Rajhi Capital Saudi Arabia 2,791.0 2,793.9 -0.1%
3 3 Samba Capital Saudi Arabia 1,953.0 2,177.0 -10.3%
4 9 Maybank Asset
Management
Malaysia 1,602.3 1,242.4 +29.0%
5 5 Asian Islamic
Investment Management
Malaysia 1,476.7 1,561.9 -5.5%
6 4 CIMB Islamic Malaysia 1,445.0 1,637.0 -11.7%
7 8 AmInvest Malaysia 1,197.0 1,287.0 -7.0%
8 10 Riyad Capital Saudi Arabia 1,064.2 1,184.5 -10.2%
9 12 Franklin Templeton
Investments
US/Malaysia 1,035.0 782.0 +32.4%
10 11 BNP Paribas
Investment Partners
France/Malaysia 1,018.7 951.3 +7.1%
11 7 Public Mutual Malaysia 1,011.5 1,475.7 -31.5%
12 6 RHB Asset Management Malaysia 993.5 1,490.3 -33.3%
13 14 Eastspring Investments Singapore 678.0 618.0 +9.7%
14 13 HSBC (Saudi Arabia) Saudi Arabia 535.0 652.0 -17.9%
15 15 Amundi  France/Singapore 461.0 508.0 -9.3%
16 16 ANB Invest Saudi Arabia 438.0 497.2 -11.9%
17 18 Saudi Hollandi Capital Saudi Arabia 274.0 245.9 +11.4%
18 19 Al Meezan Investment
Management
Pakistan 266.0 211.0 +26.1%
19 20 Nomura Asset
Management
Japan/Malaysia 242.8 199.0 +22.0%
20 17 Falcom Financial
Services
Saudi Arabia 188.3 373.3 -49.6%
21 22 Amanah Mutual Malaysia 171.3 176.5 -2.9%
22 27 Hong Leong Asset
Management
Malaysia 164.9 96.4 +71.1%
23 31 Jadwa Asset Management Saudi Arabia 156.4 84.5 +85.1%
24 25 Al Rayan Investment Qatar 155.2 113.4 +36.8%
25 21 NBAD Asset Management UAE 150.1 179.7 -16.5%
26 26 BLME UK 104.5 98.6 +6.0%
27 30 Al Dar Asset
Management
Kuwait 82.9 86.5 -4.2%
28 24 Rasmala Investment Bank UAE 67.9 125.5 -45.9%
29 29 Mandiri Investasi Indonesia 67.3 88.3 -23.8%
30 28 Manulife Asset
Management
Canada/Malaysia 67.1 93.0 -27.8%
31 33 Saturna Capital United States 47.0 35.0 +34.3%
32 23 Oasis Crescent
Management
South Africa 44.2 138.6 -68.1%
33 32 Pacific Mutual Fund Malaysia 40.0 68.6 -41.7%
34 - TA Investment
Management
Malaysia 36.5 - -
35 36 Schroder Investment
Management
UK 31.4 21.5 +46.1%
36 34 Samuel Asset Manajemen Indonesia 26.2 27.1 -3.0%
37 35 Kenanga Investors Malaysia 21.2 25.7 -17.8%
- 37 Kagiso Asset
Management
South Africa 0 16.7 -100%

 

Managers of sharia funds ranked by alternative assets
2015 2014 Company Geography Total
($ million)
Total
2014
%
change
1 2 Jadwa Asset Management Saudi Arabia 2,192.4 1,921.0 +14.1%
2 1 Absa Capital South Africa 2,007.5 3,076.6 -34.7%
3 - HSBC (Saudi Arabia) Saudi Arabia 859.0 0.0 -
4 3 Samba Capital Saudi Arabia 618.3 527.0 -17.3%
5 7 Asian Islamic
Investment Management
Malaysia 480.7 282.3 +70.3%
6 9 ANB Invest Saudi Arabia 456.9 181.6 +151.6%
7 4 Maybank Asset
Management
Malaysia 383.6 509.5 -24.7%
8 5 Kuwait Financial Center Kuwait 326.7 404.6 -19.3%
9 8 NCB Capital Saudi Arabia 295.1 277.3 +6.4%
10 11 Riyad Capital Saudi Arabia 233.9 129.3 +80.9%
11 14 Rasmala Investment Bank UAE 222.4 89.6 +148.1%
12 6 CIMB Islamic Malaysia 141.0 368.9 -61.8%
13 16 Falcom Financial
Services
Saudi Arabia 94.9 54.1 +75.4%
14 13 AmInvest Malaysia 70.0 99.0 -29.3%
15 17 BLME UK 49.6 47.0 +5.5%
16 18 Al Rajhi Capital Saudi Arabia 29.2 33.5 -12.8%
17 19 Saudi Hollandi Capital Saudi Arabia 7.0 9.9 -29.5%
18 12 Al Meezan Investment
Management
Pakistan 1.1 115.0 -99.0%
- 10 Saturna Capital United States 0.0 135.5 -100.0%
- 15 RHB Asset Management Malaysia 0.0 129.3 -100.0%
- 20 Pacific Mutual Fund Malaysia 0.0 68.6 -100.0%