Available globally to Islamic investment managers and traditional investment managers managing Islamic funds,the service offers sharia-compliant fund accounting and administration, global custody, transfer agency, banking and treasury services in 17 markets in the Middle East, Asia-Pacific, Europe and the Americas.
The services are offered in local timezones using the local language and currency.“While we have serviced our clients in a number of locations with locally implemented Islamic solutions, we now present a globallyconsistent offering,” commented Germain Birgen, head of HSBC Amanah Securities Services.
Islamic banks are still mushrooming and the industry is heading to new markets as diverse as Germany, France and Algeria, according to the Ernst & Young Islamic Funds & Investment Report 2010. Higher oil prices and the stronger economic relations between the Gulf Co-operation Council (GCC) states and the Far East are also helping the Islamic finance centres in Dubai, Bahrain and Saudi Arabia to flourish.
Global Islamic fund assets stagnated at $52.3 billion in 2009, remaining at almost the same level as the $51.4 billion posted in 2008 compared with the global conventional mutual fund assets under management (AUM) which grew from $19 trillion in 2008 to $22 trillion in 2009.
The research revealed that only 29 new Islamic funds were launched in 2009, almost offsetting the 27 Islamic funds that were liquidated during the same period. New Islamic funds launched were at their highest number ever at 173 in 2007. Since then, this number has declined dramatically.
The overall Islamic asset management industry, which includes funds and Islamic investment accounts, rose to $292 billion or 31.1% of the total industry assets in 2009.
There is continued strong growth in the overall sharia-sensitive investable assets, concluded the report. “Sharia-compliant investable wealth pool grew by 20% to reach $480 billion in 2009. In 2008 this was $400 billion. The GCC remains the single biggest contributor to this growing wealth pool. It clearly represents substantial untapped opportunities for local and international players who can understand and respond to their investors’ evolving needs,” said Ashar Nazim, director at Ernst & Young’s Islamic financial services team in Bahrain.
In 2009 there was a shift away from fund investments in traditional asset classes, such as equities and real estate funds, as a number of new alternative asset classes, including sharia-compliant exchange traded funds (ETFs) and hedge funds, were launched.
No real estate-focused funds were launched in 2009 compared with 10 in 2008 and 18 in 2007. The lack of investor confidence led to placing higher proportion of deposits with banks, rather than investing in funds.
The report revealed that almost 70% of Islamic fund managers are struggling to build scale and have under $75 million in AUM while 55% had less than $50 million AUM.
Most leading Islamic fund managers are refocusing on understanding their investors’ appetite post-crises. “Rebuilding investors’ trust is of paramount importance and has moved up the priority list for fund managers, ” said Ashar.
Several investor segments are showing early signs of recovery, also reflected by choice of riskier asset classes. Allocation to cash and money market products decreased in 2009 and there is a clear preference for larger, more established brands in the market, said the report.
Fund managers are focusing on enhancing the quality of their offering, moving away from transaction-only approaches to comprehensive wealth management solutions. There has been substantial investment in enhancing risk infrastructure, adopting flexible business models, segmented approach to accessing new customers as well as dramatic changes in fee and cost structures including more transparency and incentive based remuneration. All this also feeds into building stronger brands.
“The fact that the sharia-sensitive wealth pool is still showing strong growth, the opportunity is really for the fund managers who can quickly adapt their strategies to address clients’ requirements who are smarter and more demanding than what we saw earlier in the decade,” concluded Ashar.
The Ernst & Young report was researched using insights from over 400 key players in all major financial markets.
HSBC Securities Services provides fund administration, custody and related securities services around the world with global assets under custody of $5.6 trillion and global assets under administration are $2.5 trillion
Article from Global Islamic Finance Magazine
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