By Mushtak Parker
Malaysia is fast establishing itself as the global hub for dedicated Islamic fund management companies. The Securities Commission Malaysia (SC), the securities regulator chaired by Zarinah Anwar, granted at the end of June 2010 the latest Islamic fund management license to Saturna Capital Corp., an American fund manager with a good track record in managing Shariah-compliant funds. This brings the number of dedicated Islamic fund management companies licensed in Malaysia to twelve.
Malaysia and Saudi Arabia are the two largest Islamic funds markets in the world. According to the latest data from the Capital Market Authority (CMA) in Saudi Arabia, there are 147 Islamic mutual funds in the Kingdom – with a total volume of just under $30 billion. NCB Capital is the largest with 24 funds under the Al-Ahli label. Similarly, according to the latest SC data, the number of Islamic unit trusts and mutual funds in Malaysia totaled 155 at the end of June 2010 with a total volume of about RM22.69 billion.
Saturna in reality bought over Alpha Asset Management Sdn Bhd and got approval from the SC to convert Alpha’s conventional assets into Shariah-compliant portfolios. Subsequently Alpha Asset management was renamed Saturna Sdn Bhd (SSB). Bryce Fegley, SSB’s chief investment officer, will direct international equity research and oversee daily operations of the Kuala Lumpur staff, including investment advisory services, sales, and marketing.
Saturna Capital Corp., which was established in 1989 in Bellingham, (Washington state), is an experienced Islamic fund manager through its family of Shariah-compliant Amana mutual funds which include Amana Growth Fund, Amana Income Fund, Amana Developing World Fund; and the Saturna Investment Trust, which itself comprises six funds, Sextant Growth (domestic equities), Sextant International, (foreign stocks), Sextant Core (bonds and equities), Sextant Bond Income (long-term bonds), Sextant Short-Term Bond, and the Idaho Tax-Exempt Fund.
Saturna’s total Shariah-compliant funds under management currently are in excess of $3 billion (RM9.93 billion). “We chose Malaysia because the government is moving to establish Kuala Lumpur as a global center for Islamic finance,” explained Nick Kaiser, chairman and founder of Saturna Capital and portfolio manager of the Amana Trust Funds said in a statement. Saturna is keen to serve a broader client base in Muslim-majority markets, including individuals, corporations, and institutions.
These sentiments are echoed by several foreign fund managers who see the Malaysian government’s proactive policy toward supporting Islamic finance as a major reason for their targeting Kuala Lumpur as a regional base for their Islamic finance fund and investment activities.
Indeed, India’s largest asset management company, Reliance Capital Asset Management (RCAM), part of the Reliance Anil Dhirubhai Ambani Group, is one such global fund company to target Malaysia as its Islamic finance hub.
Through its wholly-owned Malaysian standalone Islamic subsidiary, Reliance Asset Management (Malaysia) Sdn Bhd (RAMMy), which got a license from the Securities Commission Malaysia (SC) last August, RCAM has embarked on a global Islamic asset management and fixed income strategy which will see the launch over the next few months of five Shariah-compliant funds – a global equity fund, an India country fund, a BRIC fund, a money market fund and a global sukuk fund.
“Our Malaysian company will be the flagship venture in the Islamic asset management business and a global hub for Shariah-compliant products. The long-term objective is to target the retail Shariah market in the region. This is also in line with the strategy to expand our fund management footprint across key global markets,” explained Mazahr Alam, regional head – GCC Islamic Business at Reliance Capital Asset Management (UK), a sister company to RAMMy.
RCAM has $33 billion funds under management and believes that there is huge potential for Islamic asset management especially amongst NRI (non-resident Indians) in Malaysia, the GCC countries, Europe, South Africa and North America. Both RCAM and RAMMy are also targeting conventional and Islamic asset management opportunities in Malaysia involving government-linked companies (GICs).
The SC in the last year has also licensed Credit Agricole Asset Management Islamic Malaysia Sdn Bhd (CAAM Islamic Malaysia) to carry out Islamic fund management business in Malaysia. Other Islamic fund management companies which have already been licensed by the SC include Aberdeen Islamic Asset Management Sdn Bhd; AmIslamic Funds Management Sdn Bhd; Asian Islamic Investment Management Sdn Bhd (AIMAN); BNP Paribas Islamic Asset Management Malaysia Sdn Bhd; CIMB-Principal Islamic Asset Management Sdn Bhd; i-VCAP Management Sdn Bhd; KFH Asset Management Sdn Bhd; Nomura Islamic Asset Management Sdn Bhd; and Prudential Al-Wara’ Asset Management Berhad.
AIMAN in March teamed up with Hwang DBS Investment Management Bhd. to launch a pioneering Islamic investment fund that is aimed at giving investors direct access to the highly restricted and lucrative China A-share market, signals the latest manifestation of growing Malaysian Islamic investment interest in the Mainland Chinese market. The Hwang DBS AIIMAN A20 China Access Fund, according to Nor Azamin Salleh, CEO and executive director of AIIMAN, is the first of its kind to be launched in Malaysia and globally, and represents a tremendous step forward in terms of product innovation and fund management capability for both the Islamic and conventional investment management industry.
The AIIMAN A20 fund is an $100 million multicurrency open-ended Islamic wholesale fund that will invest into the 20 largest Shariah-compliant China A-share companies, in terms of their market capitalization, listed in Shanghai or Shenzhen Stock Exchanges.
The Malaysian Islamic capital markets policy is underpinned by several capital market collaborative agreements signed by Malaysia with countries including South Korea, India, Hong Kong, Dubai International Financial Centre (DIFC), Australia and others.
These agreements are aimed at strengthening regulatory co-operation between SC and counterpart securities regulators, including among others examining the establishment of a framework for mutual recognition in key segments of the Islamic capital market to facilitate enhanced cross-border market oversight and exchange of technical knowledge.
Indeed Malaysia’s Islamic Markets Program (IMP), which is held annually by the Securities Industry Development Corporation (SIDC), the training and development arm of the Securities Commission Malaysia (SC), is by far the best in the world and is aimed at helping participants to analyze the philosophy and fundamentals of ICM and to distinguish between its various products; to evaluate Islamic equity, sukuk and derivatives as alternatives means of financing and investment to conventional products; and to assess the significance and essentials of corporate governance, risk management and sound regulation in promoting Islamic markets.
In fact, the 5th annual IMP under the theme “Gearing up to Meet Future Challenges” convened in Kuala Lumpur for a 5-day program – the fifth since 2006 – which comprised an introductory workshop on Islamic finance; ICM offerings and processes; strengthening ICM framework; Islamic equity and sukuk; and meeting the challenges ahead.
(Courtesy: Arab News)