Sharia equity portfolios have proven a steep and continued increase in Islamic assets under management last year, but fund houses are affecting retail and sovereign sector to grow.
Growth of investor types and interest worldwide is positively and rapidly rising, without any signs for a sudden decrease. Moreover, new types of sharia-compliant products surface and an increasing amount of firms show great interest for branching out into Islamic alternative investments.
The sharia-compliant assets of the top 50 Islamic fund houses grew by a 25.6% increase in the previous year to $86.4 billion. In contrast to conventional global AUM growth, the Islamic fund houses significantly outpace though from admittedly a much lower base.
Between 2007 and 2012, Global AUM grew by 1.4% annualised to $63.9 trillion, and predict to further rise by an estimated 4.9% annually to $101.7 trillion in 6 years, according to a PwC report published last month. Whereas by end of 2012, the Islamic money-market funds were just are large in AUM terms as Islamic equity products.
This growth has affected many stock market valuation such as in the US and Japan. Unlike ‘suksuk’, which must be structured, Islamic equity investment enters the same stock markets as traditional portfolios and merely screens out companies that do not meet sharia standards e.g. banks/brewers. Therefore, it is difficult to evaluate whether Islamic equity funds are receiving many new mandates.
These equity funds grew 48.6% year on year to $29.3% billion by 2013. Islamic alternative assets too increased with AUM 43.2% to $8.5 billion. ‘suksuk’ and money-market funds however only grew by 3.5% to $20.5 billion.