Islamic Investor: Islamic Investor: - Islamic Finance News

FEATURE
Source: Eurekahedge
conducive environment for growth in the industry. In the last two
years Malaysia has further strengthened its place by issuing
more licenses to foreign banks; a policy that is set to continue.
As such, the country looks set to maintain its position as the
leading Islamic fund center in the coming years.
Geographic mandates
Forty three percent of Islamic fund assets are invested in the
Middle East and Africa, primarily because the region holds the
greatest number of Shariah compliant companies. However,
the distribution of assets across the different geographic
investment mandates has witnessed some significant changes
over the last few years. Figure 3 shows the distribution of
Islamic fund assets across the different geographies, and
although the Middle East/Africa mandate still accounts for the
largest share of assets, this share has been declining steadily
– fi ve years ago 63% of Islamic fund assets were invested in
this region. The main reasons for this are the strong growth
witnessed in Islamic fi nance sectors in other regions and the
trend of diversifi cation amongst Islamic funds.
Asset classes
Equity investments account for 42% of Islamic fund assets
Source: Eurekahedge
primarily because allocating to Shariah compliant companies
(becoming shareholders) forms the easiest method of Islamic
investment. Furthermore, equities have been the best
performing asset class in the last 40 years and continue to
be the most popular among investors; who also fi nd the asset
class easier to understand compared to other more complicated
Islamic fi nance instruments. Fixed income investments account
for 15% of the assets; however, only 7% of the funds employ a
fi xed income mandate, showing that there are just a few very
large Islamic funds focused on Sukuk investments. Other asset
classes are also becoming increasingly popular as the sector
develops to encompass other investments.
Performance
Over the years, Islamic funds have delivered greater and
more consistent performance as opposed to other comparable
investments. The Eurekahedge Islamic Funds Index has gained
36.11% (as at the end of June 2011) since its inception in
December 1999. Comparatively, the Dow Jones Sustainability
Index gained 13.19% over the same period of time, while the
MSCI World Index lost 5.62%.
Figure 6 displays the Eurekahedge Islamic Funds Index
Source: Eurekahedge
Source: Eurekahedge
14 September 2011