Ernst & Young’s Islamic Funds and Investments Report 2011

Ashar M. Nazim

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Islamic funds industry grew to US$58 billion in 2010, achieving a 7.6% growth. The Islamic fund universe comprises of some 100 fund managers. Favored asset classes continue to be equities, commodities, Sukuk and alternatives. For Sukuk assets specially, 2010 was a record year with US$50 billion of total issuance. As the industry continues to realign itself, there were 23 new Islamic funds launched during the year while 46 funds were liquidated. The growth is a welcome trend given the industry’s flat performance in recent years. It was primarily driven by market performance, and only marginally from new net money raised by fund managers. The recovery was also tested by the evolving geo-political situation across MENA. Secondly, there remain serious concerns on the increasing likelihood of sovereign debt crisis in Europe and a double dip recession in the US. Both these factors will continue to influence conventional and Islamic asset management industry going into 2012. The addressable universe for Islamic fund managers is in excess of US$500 billion, and still growing by at least 10-15% annually. In the GCC, liquid wealth with Shari’a sensitive investors will add more than US$70b to this pool by 2013. Our award winning Islamic Financial Services team explored the emerging trends with leading Islamic fund managers and their ability to assist clients in managing this wealth. It appears that the top three priorities for the industry are: