Islamic Fund Management
14
Figure 2.2: Differentiating the Criteria between Islamic and Conventional Funds
Source: Adapted from ISRA (2015)
It is also important to highlight that one of the key effects of Islamic asset management is in
security selection for instance, depicts the difference in asset allocation between a
conventional and Islamic investor.
Table 2.1: Difference in Asset Allocation between Conventional and Islamic Investor
Conventional Investor Islamic Investor
Asset Class Allocation Asset Class Allocation
Money market funds 5% Murabahah and trade
finance funds
5%
Fixed income 40% Sukuk 40%
Equities 40% Shariah-compliant
equities
40%
Alternative Investments 15% Shariah-compliant
alternatives
15%
Source: Sandwick (2016)
2.1.3 Role of Fund Management from Economic and Islamic Viewpoints
In many countries, the development of banking is often prioritised to the detriment of fund
management. This has a potentially negative impact on financial stability―as fractional reserve
banking is a more fragile model―and efficient capital mobilisation. Banks favour collateralised
capital lending to the public/corporate sector and personal (home and car) segment. This
leaves small and medium enterprises (SMEs) relatively underserved. Specialised VC and PE
funds are generally skilled at deploying capital, raising corporate capabilities and enhancing