Thomson Reuters has announced the initial findings from its Global Islamic Asset Management Report 2014, prepared in collaboration with Lipper.
Earlier this year, Thomson Reuters launched the global Islamic asset management survey to gather market consensus on the state and direction of the global Islamic asset management sector.
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The survey targeted both investors and asset managers in order to present a fuller picture of the Islamic asset management space.
The report provides unique insights into the development of the sector, highlighting key milestones reached this year, critical challenges to growth, as well as proposed solutions to further develop the Islamic asset management sector.
Russell Haworth, managing director, Middle East & North Africa, Thomson Reuters, said: "The Islamic asset management space continues to lag behind in terms of growth compared to Islamic banking. Thomson Reuters is committed to building greater insight and analysis of the Islamic Finance sector overall, and Shar’iah complaint asset management is a critical component of that industry. This year’s report will act as an important benchmark for the industry as it continues to grow."
Key findings include:
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By GlobalData- With Assets Under Management (AUMs) in Saudi Arabia exceeding US$6 billion, the Kingdom accounts for 20% of the global market and is the second largest market for Islamic funds globally
- Saudi Arabia is also the second largest hub for Islamic funds with over 163 domiciled funds
- The number of funds has doubled since 2007 to 786 globally
- 2013 saw the highest number of fund launches in four years; 20% of issuances were in Gulf countries, mainly due to a large number of Saudi funds launched during the year
- Assets under management (AUM) of global funds stand at just over US$62 billion, with mutual funds accounting for the bulk of this amount, with over US$46 billion
- However, AUMs have only increased marginally over the last few years, and declined by 1.7% in 2013
- The sector is primarily retail driven, with only 20% of AUMs derived from institutional investors
- The underdevelopment of takaful operators and pension funds in Islamic countries has a knock-on effect on the Islamic asset management space
- Compulsory registration and preceding authorization of Islamic funds with the capital market authority in Saudi Arabia has led to smaller asset managers exiting the market
Sayd Farook, global head of Islamic Capital Markets for Thomson Reuters, said: "Attracting institutional investors is seen a key requirement for the growth and long-term sustainability of the Islamic asset management industry. Despites the lack of institutional participation, we see positive signs, such as the development of pension assets in Islamic countries. We estimate GCC pension assets to be USD 180 billion. Attracting a small portion of these could significantly increase assets under management for Islamic asset managers.
"Saudi Arabia is a step ahead other GCC countries as asset managers adopt innovative strategies to increase their investor base. For example, this year SEDCO Capital is coming out with their first Islamic fund that will be compatible with socially responsible investment parameters. The fund will have environmental, social and corporate governance principals incorporated into the fund investment strategy, broadening its appeal to a new range of investors."
