Islamic Fund Management
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a. Less wealthy investors such as SMEs can invest in different Islamic capital market
instruments such as Islamic equity, sukuk, real estate and Islamic derivatives. In
addition, they can have access to a diversified portfolio of securities, which would
be costly if purchased directly.
b. Unsophisticated investors such as retail players have an equal opportunity to
access the capital markets (Davydoff, Gabaut & Naacke, 2011, p. 19).
2. To contribute to financial market efficiency by strengthening price discovery, reducing
transaction costs (particularly for ETFs), providing market liquidity, moderating market
volatility and bringing stability to the overall financial system (Davydoff, Gabaut &
Naacke, 2011; World Economic Forum, 2015).
3. To supply an efficient avenue for capital recycling. Fund management, like pension
funds, allows savers and retirees to channel their savings into an early-stage capital
investment that can support funding businesses and real economic activity. In return,
savers will receive good returns if the investment result is favourable, or they will bear
the risks if the outcome is unfavourable (Caprosia, 2015).
2.3 Future Trends of Islamic Fund Management Industry
Two trends that have an important effect on the Islamic fund management industry and have
the potential to substantially expand this industry concern the role of SRI and the application
of fintech in investment management. These are discussed below.
2.3.1 Sustainable and Responsible Investment (SRI)
There is a natural convergence between Islamic finance principles, ESG, SRI, SDGs, green and
impact investing. While various labels are used and diverse issues are addressed, the different
approaches aim to achieve similar objectives notably that of creating financial systems that are
more equitable, sustainable and impactful on society, the environment and the economy. For
instance, the issue of climate change―specifically, the commitments of governments to reduce
carbon emissions and increase the sustainability of natural resources―presents significant
opportunities for green finance to be part of investment or funding initiatives to finance
environment-related projects around the world. The shared SRI and Islamic finance values
provide a positive outlook on Shariah-compliant SRI funds.
Specifically, a positive environment has been created in Malaysia for the Islamic-SRI sector,
with the support of the regulators and the collaborative efforts of industry players. Recent
developments are spelt out i