MENA Asset Management Survey 2012 - National Bank of Abu Dhabi

Sharia Compliant Funds
it was liquidated a year later because of lack of demand. The third largest German bank
at the time—Commerzbank—liquidated its fund in 2005 for the same reason.
One example of an asset management company that has realised the opportunity for
Shariah-compliant products in Europe is the Kuala Lumpur-based CIMB-Principal Islamic
Asset Management. CIMB-Principal is a joint venture between the CIMB Group and
Principal Global Investors (PGI). CIMB-Principal launched three UCITS-compliant
Islamic equity funds in Ireland, a European funds hub for cross-border distribution.
According to the European UCITS law, CIMB-Principal can now passport its funds to
other European countries and distribute them without running them through a complete
new registration process. Even though it is too early to evaluate whether this initiative
has been a success, this move shows that the asset management industry has identified
the growth potential for Islamic funds in Western countries.
Outlook
In our opinion, it will be crucial for the success of the Islamic asset management industry
in Western countries to create and launch funds that have a clear focus. In addition, the
performance of these funds needs to be in line with the expectations of investors. It is
important that these funds are comparable with other funds sold in the markets. This
means Islamic funds need to have the same level of sophistication and transparency.
Fund management companies need to bring their processes, especially in terms of
reporting standards, into line with the general market standards of the Western asset
management industry in order to attract investors in these markets.
The crash in the real estate markets of the past few years has shown that the focus of
Islamic money on real estate markets has added a risk to investors’ portfolios (according
to the latest Ernst & Young world Islamic report of assets invested in this sector). This
risk could have been avoided by broader diversification. With regard to these
experiences, investors have learned their lesson and now search for more diversified
products. This demand for diversification in Shariah-compliant mutual funds could
become a key driver for the growth of Islamic funds all over the world.
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