Islamic Fund Management
79
At present, Malaysia’s main government-backed retirement fund is the Employee Provident
Fund (EPF), which collects mandatory contributions from registered workers. The funds are
invested in a range of asset classes. Based on the EPF’s 2017 annual report, its AuM amounted
to RM791.5 billion (equivalent to USD208.3 billion) as at end-2017. Annual contributions from
both employees and employers sum up to some RM65.5 billion. The fund has 13.8 million
members, of which 7.1 million are active contributors. Due to the EPF’s sizeable AuM, it plays a
significant role in developing Malaysia’s fund management industry. The channelling of private
savings through Tabung Haji, PRS, EPF, insurance/takaful operators and other key institutions
have had a profound impact on the development of the fund management arena. Malaysia’s
sizeable Muslim population (61.3% of its total) has further fuelled demand for Shariah-
compliant investments and the growth of Islamic funds.
4.2.3 Investment and Commercial Considerations
Value Proposition of Islamic Funds
Malaysia’s Islamic fund management industry thrives because of the following key value
propositions:
1. Recognised Leader in Islamic Finance and Key Marketplace for Islamic Financial
Activities
Malaysia’s Islamic financial ecosystem offers a full range of Islamic financial services with
comprehensive ICM capabilities complemented further by vibrant Islamic banking and takaful
segments. Its Islamic funds and sukuk markets ranked among the largest in the world. The
development and growth of the Islamic fund management industry can be attributed largely by
the well-established ICM ecosystem.
Key ICM ecosystem includes Shariah governance framework and relevant regulatory
frameworks that have provided guidance and clarity on Shariah matters which in turn
facilitate the introduction of Shariah-compliant products and services. The frameworks also
contributed significantly in boosting market participants’ confidence in and providing
credibility to the ICM. In this regard, Malaysia is the only country in the world with a
regulatory framework for Islamic fund management companies. As at end 2017, there were 20
full-fledged Islamic fund management companies and 35 fund management companies (via
Islamic windows) offering their Islamic fund management capabilities to the industry.
Tax frameworks and incentives have also played a key role in contributing towards the
development of the Malaysian ICM, this is to facilitate the growth of existing and new market
segments within ICM. Islamic fund management industry currently enjoys a tax exemption on
management fee income from managing Islamic funds. Other relevant incentives for the fund
management industry are delineated i