Islamic Fund Management
1
EXECUTIVE SUMMARY
Islamic fund management essentially refers to the professional management of investors’ fund
or money in a portfolio of securities, an asset or a class of assets by fund managers, in
accordance with Shariah principles to achieve specified financial objectives. Islamic funds
offered in the market usually fall under the umbrella of ‘collective investment schemes’ (CIS)
which can take the form of Islamic unit trusts, mutual funds, investment trusts or other
appellations. The various types of Islamic funds include myriad financial solutions ranging
from conservative investments to more aggressive plans for capital growth. Some of these
solutions not only focus on wealth accumulation and capital preservation, but may also favour
tax-incentive funds that promote long-term investments and inter-generational wealth
transfer.
This report, Islamic Fund Management, reviews the development of the Islamic fund
management industry and analyses the factors required to support its sustainable growth. In
determining these factors, comparisons have been made between countries experiencing
different stages of market progress―Malaysia as a matured market, Pakistan as a developing
market (but in an advanced stage), South Africa also as a developing market (albeit in an
intermediate stage), and Morocco as a market still in its infancy.
Overall, the Islamic fund management industry is still a niche sector representing a minor
segment (i.e. USD56.1 billion as at end-2016) of the global fund management industry
(USD84.9 trillion in 2016). As at end-2017, 88% of the industry’s asset under management
(AuM) was concentrated in the top five jurisdictions, i.e. Saudi Arabia (37.10%), Malaysia
(31.66%), Ireland (8.62%), the United States (5.25%) and Luxembourg (4.76%), while the
remaining 12% was distributed across 29 other jurisdictions including offshore domiciles.
The report also provides a detailed description of the various types of Islamic funds available
in the market including Islamic equity funds, fixed-income funds, money market funds,
exchange-traded funds (ETFs) and real estate investment trusts (REITs), along with their
comparative advantages and disadvantages.
Following analysis of the case-study countries, it is acknowledged that the establishment of the
necessary pillars to kick start or support the development of the Islamic fund management
industry is key towards ensuring sustainable organic growth. 1 illustrates these core
pillars.