Dear Finance & Investment Leader, It is with great pleasure that we present to you the 5th annual edition of the Ernst & Young Islamic Funds and Investments Report (IFIR 2011), a ground-breaking original research project developed in collaboration with leading global professional services organization, Ernst & Young. Given the recent growth and momentum achieved by the global Islamic funds and investments industry in the post-crisis landscape, it is essential today more than ever that the strong foundations prepared for the industry are now utilized to build critical mass and international scale for the industry. The Ernst & Young Islamic Funds and Investments Report has over the past 5 years, established itself as critical reference resource for the key decision makers in the global Shariah compliant funds and investments industry. Exclusively launched on-site at a special plenary session of the 7th Annual World Islamic Funds and Financial Markets Conference (WIFFMC 2011), IFIR 2011, with a principal focus on achieving growth in challenging times, will analyze the key trends shaping the industry and will map out future strategic directions that the industry leaders will have to adopt to probe the emerging landscape of opportunities. We would like to express our sincere gratitude to Ernst & Young and their Islamic Financial Services Group for investing their considerable talent and resources in developing the Ernst & Young Islamic Funds and Investments Report. We hope that the analysis in this years Report will provide practical, constructive and valuable insights which will be useful in your own strategic planning activities and will assist your organization in its quest for success as the global Islamic funds and investments industry enters the next phase of growth. To know more on how your organization can play a part in this initiative in the future, please e-mail sophie@megaevents.net Yours sincerely,
David McLean Managing Director The World Islamic Funds & Financial Markets Conference A MEGA Brand
MEGA Brands: Shaping the Future of the Global Islamic Finance Industry Since 1993 P.O. Box 72045, Dubai, UAE | t. +9714 343 1200 | f+971 4 343 6003 MEGA Brands. MEGA Clients. Market Leaders. www.megaevents.net
Disclaimer
The contents of the Islamic Funds and Investments Report 2011 are based on a combination of quantitative data and qualitative comments and hence provide a subjective assessment of the current market. All quantitative comments are based on published information wherever possible. Where published reliable data was not available, qualitative comments were made which may or may not reflect the true state of affairs. Information has been assimilated from secondary sources, including published country, industry and institutional information, and primary sources, in the form of interviews with industry executives. We are not expressing any assurance on the accuracy or completeness of the information obtained. Although this report has been documented based on our understanding of Islamic financing activities to include only such activities that are deemed Sharia compliant, no Sharia opinion whatsoever has been taken on this report. Hence, the contents of this report, in terms of the activities to be carried out, might not necessarily be consistent with Sharia in all cases, and the opinion of a Sharia scholar(s) should be taken before any further steps are made to implement suggestions made in the report. Whilst every care has been taken in the preparation of this report, no responsibility is taken by Ernst & Young as to the accuracy or completeness of the data used or consequent conclusions based on that data, due to the respective uncertainties associated with any assumptions that have been made. No part of this document may be republished, distributed, retransmitted, cited or quoted to anyone without prior written permission from Ernst & Young.
ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
Contents
1. 2. 3. 4. 5. 6. 7. 8. 9.
Setting the scene Products and asset classes Current state of the Islamic fund industry The future risk environment Conclusion Appendix 1: Q&A with Islamic fund managers Appendix 2: Islamic fund characteristics Appendix 3: Jurisdiction overview Team and references
6 12 19 26 27 28 33 35 43
Executive Brief Ernst & Youngs Islamic Funds and Investments Report 2011
Dear Investment Executive 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 industrys 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 Sharia 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:
Origination and structuring limited availability of quality Sharia compliant assets means fewer products to invest in. Trust in the brand and track record are important factors, and will favor established and larger players. Distribution model access (possibly through alliances) to affluent investors and institutional clients like Waqf, family businesses, takaful operators etc. is central to future growth. Achieving scale given the 30% fee compression over recent years. A re-look at the revenue and cost strategy, operating model and most importantly the risk infrastructure, will help set the tone for sustainable growth.
Looking ahead, the challenging times are by no means over. I hope you will find these market insights useful for your businesses. Ashar M. Nazim Islamic Financial Services Leader Ernst & Young
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ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
Key messages
1.
Islamic funds industry benefited from performing markets in 2010 but global economic uncertainty risks recovery in the future
Islamic funds assets under management grew 7.6% to US$58 billion in 2010 but the performance will be difficult to repeat this year
2.
Sukuk, commodities and capital protected funds did well in 2010; bringing new money into high risk equities will remain a challenge
Investors remain cautious about investing in plain vanilla equity funds; recent decline in market prices has increased flow into money market funds
3.
4.
Global economic scenario, investors risk aversion and political aftermath of the Arab Spring are the top three risks in Fund Managers minds
Leading fund managers rate the economic situation in Europe and the US as the single biggest concern on future market performance as no region or market will remain immune in case of a double dip recession
5
Global mutual funds AuM reached US$25.6 trillion in 1Q2011, 35% higher than the low touched in 2008
Financial Crisis
50 40 30 20
10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q1 2011
Worldwide Total Net Assets of Mutual Funds (LHS) Worldwide Number of Mutual Funds (RHS)
Note: The data is for 45 countries
After three flat years, the global Islamic fund management industry expanded by 7.6% in 2010, reaching US$58 billion in AuM; 13% higher than 2008
Number of Funds
900 800 700 600 500 400 300 200 100 0 2008 2009
Number of Funds (RHS)
2010
This is largely due to market performance and only partially on account of new money flows; 23 new funds launched, 46 liquidated
78
46
29 19
27
23
2009
The over dependence on a few institutional investors (Institutional Funds make up two-thirds of the total new funds launched) is a key structural weakness in Islamic markets globally (except Malaysia)
Breakup of Retail and Institutional Islamic Funds Launched
% 100 90 80 70 60 50 40 30 20 10 0 2007 2008 2009 2010 43% 32% 33% 33% 57% 68% 67% 67% Institutional Funds Retail Funds
Source: Eureka Hedge, Zawya, Ernst & Young analysis Note: Retail funds are defined as funds that have a minimum initial subscription of US$2,000 or less
9
Sharia sensitive investors tend to park money with banks rather than investing in Islamic funds which constitute only 5.6% of the US$1 trillion industry
Total Industry Estimated Islamic Finance US$ 939 b Assets US$ 1,033 billion
20% 9% 2008
Saudi Arabia
Malaysia
Other AuM includes off balance sheet direct investments managed by banks and investment companies and restricted profit sharing accounts Islamic funds represent only 5.6% of the total Islamic financial services industry
Source: Central Banks Reports, Securities Commission Malaysia, DataMonitor, Eureka Hedge, Zawya, Ernst & Young analysis
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ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
Key messages
1.
Islamic funds industry benefited from performing markets in 2010 but global economic uncertainty risks recovery in the future
Islamic funds assets under management grew 7.6% to US$58 billion in 2010 but the performance will be difficult to repeat this year
2.
Sukuk, commodities and capital protected funds did well in 2010; bringing new money into high risk equities will remain a challenge
Investors remain cautious about investing in plain vanilla equity funds; recent decline in market prices has increased flow into money market funds
3.
4.
Global economic scenario, investors risk aversion and political aftermath of the Arab Spring are the top three risks in Fund Managers minds
Leading fund managers rate the economic situation in Europe and the US as the single biggest concern on future market performance as no region or market will remain immune in case of a double dip recession
11
Equity funds performed in 2010 as markets recovered...but the future is likely to be volatile mainly due to economic problems in Europe and the US
%
20 10 0 Dec 13 2010 Aug 13 2007 Aug 13 2009 - 10 - 20 - 30 - 40 - 50 - 60 Aug 13 2011 Apr 13 2011 Aug 13 2008 Dec 13 2007 Dec 13 2009 Aug 13 2010 Dec 13 2010 Apr 13 2009 Apr 13 2008 Apr 13 2010
17.4
20.9
13.2 4.4
2007
2008 -10.4
2009
2010
-41.8
-50
Equity dominates the overall AuM which remains concentrated in traditional asset classes
8.7
15%
22.6
39%
Equity
Commodities
Other*
Fixed Income
Real Estate
Money Market
Balanced
Total
Source: Zawya, Eurekahedge, Ernst & Young analysis *Note: Other includes alternative investments and feeder funds
13
2010 proved to be a record year for global Sukuk issues with over US$50 billion raised; Islamic fixed income funds continued to perform well
60 50 40 30 20 10 0
% 18 16 14 12 10 8 6 4 2 0 -2
11.6 8.2 5.5 4.4 2.4 -0.1 2007 2008 2009 2010 3.4
Number of Sukuk
*Deals rumored/announced/delayed
Source: IFIS, Zawya Sukuk Monitor, Eurekahedge, Ernst & Young analysis
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ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
Global commodity prices continued to rise in 2010 albeit at a slower pace than in 2009; the surge in gold and silver prices accounts for more than 80% of the Islamic Commodity Funds performance
Merrill Lynch Commodity Excess Return Index Islamic Commodity Funds - Average Returns
Top Quartile Return Weighted Average Return
900 800 700 600 500 400 300 200 100 0 25-Feb-06 25-Feb-07 25-Feb-08 25-Feb-09 25-Feb-10 25-Oct-05 25-Oct-06 25-Oct-07 25-Oct-08 25-Oct-09 25-Oct-10 25-Feb-11 25-Jun-06 25-Jun-07 25-Jun-08 25-Jun-09 25-Jun-10 25-Jun-11
% 70 60 50 40 30 20 10 0 -10 -20
56.5
21.3
29.0
27.6 18.0
8.0 2007
Source: Merrill Lynch, Bloomberg, Eurekahedge, Zawya, Ernst & Young analysis
Money market funds lost some attraction as stability returned in 2010, but are likely to perform well going forward despite a low profit rate environment due to renewed worries on global financial situation
USD 3 Month LIBOR
%
7 6 5 4 3 2 1 0 3-May-05 3-May-06 3-May-07 3-May-08 3-May-09 3-May-10 3-May-11 3-Jan-05 3-Jan-06 3-Jan-07 3-Jan-08 3-Jan-09 3-Jan-10 3-Sep-05 3-Sep-06 3-Sep-07 3-Sep-08 3-Sep-09 3-Sep-10 3-Jan-11
Property prices have stabilized in most markets or the sharp declines have been arrested; investors continue to remain cautious about investing in real estate
% 20 15
200
150
10 5 0
100
2.7 2010
50
-5
0 21-Feb-06 21-Feb-07 21-Feb-08 21-Feb-09 21-Feb-10 21-Oct-05 21-Oct-06 21-Oct-07 21-Oct-08 21-Oct-09 21-Oct-10 21-Feb-11 21-Jun-06 21-Jun-07 21-Jun-08 21-Jun-09 21-Jun-10 21-Jun-11
Key messages
1.
Islamic funds industry benefited from performing markets in 2010 but global economic uncertainty risks recovery in the future
Islamic funds assets under management grew 7.6% to US$58 billion in 2010 but the performance will be difficult to repeat this year
2.
Sukuk, commodities and capital protected funds did well in 2010; bringing new money into high risk equities will remain a challenge
Investors remain cautious about investing in plain vanilla equity funds; recent decline in market prices has increased flow into money market funds
3.
4.
Global economic scenario, investors risk aversion and political aftermath of the Arab Spring are the top three risks in Fund Managers minds
Leading fund managers rate the economic situation in Europe and the US as the single biggest concern on future market performance as no region or market will remain immune in case of a double dip recession
18
ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
Scale remains a key issue for the Islamic fund industry worldwide; only 30% of Islamic fund managers have more than US$100 million in AuM and top 10 have ~80% market share
Number of Islamic Fund Managers by Assets Under Management (2010)
64% of Fund Managers have less than US$75m AuM 79
32 18 10 20 9 11 22
< 25
25 -50
50 -75
75 -100
100 -200
200 -300
300 -500
> 500
19
A comparison with conventional investment managers reflects the infancy stage of the Islamic funds industry; the top 25 conventional fund manager is 50 times the size of the largest Islamic fund manager
Top 25 Global Asset Managers (2009)
BlackRock State Street Global Allianz Group Fidelity Investments Vanguard Group AXA Group BNP Paribas Deutsche Bank JPMorgan Chase Capital Group Bank of New York Mellon Credit Agricole UBS Goldman Sachs Group HSBC Holdings Bank of America Natixis Legg Mason Prudential Financial Northern Trust Global Generali Group Aviva Wells Fargo Franklin Templeton MetLife 0
Source: Towers Watson
20
ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
AuM US$b
500
1000
1500
2000
2500
3000
3500
4000
A 30% compression in management fee since 2007 has added to Islamic fund managers worries in an already tough market; achieving an optimum AuM size and efficiency of operations are needed for survival
Average Management Fee of Islamic Funds
10.00%
High
5.50%
Average 1.44%
2.00%
1.75%
1.15%
1.00%
Low
0.03%
0.30%
0.35%
0.05%
0.50%
2007
2008
2009
2010
Q1 2011
Based on the average asset management fee of 1%, AuM of at least US$100 million is required for a fund manager to break-even
Break Even Management Fee for Selected AUM Levels Assets Under Management (US$m)
200 175 150 125 100 75 50 25 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
Industry Average Management Fee
22
ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
The fundamental case for Islamic funds industry remains strong; Muslim populations are growing globally and an estimated 1.5 billion Muslims constitute ~20% of world population
Global Estimated Muslim Populations in 2010
Iran ~74m
Algeria ~34m
Morocco ~32m
Malaysia ~17m GCC ~36m Nigeria ~75m Pakistan ~178m India ~177m Indonesia ~204m
Bangladesh ~148m
Also, per capita income in key Muslim countries is increasing, giving rise to wealth management opportunities
Nominal GDP per Capita (US$) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2010 2014 US$
Key messages
1.
Islamic funds industry benefited from performing markets in 2010 but global economic uncertainty risks recovery in the future
Islamic funds assets under management grew 7.6% to US$58 billion in 2010 but the performance will be difficult to repeat this year
2.
Sukuk, commodities and capital protected funds did well in 2010; bringing new money into high risk equities will remain a challenge
Investors remain cautious about investing in plain vanilla equity funds; recent decline in market prices has increased flow into money market funds
3.
4.
Global economic scenario, investors risk aversion and political aftermath of the Arab Spring are the top three risks in Fund Managers minds
Leading fund managers rate the economic situation in Europe and the US as the single biggest concern on future market performance as no region or market will remain immune in case of a double dip recession
25
Fund managers rate global economic situation and investors risk aversion as key business risks for the next 12-18 months; a comeback to 2009?
Key Business Risks 2011/12 1 Global economic downturn Investors risk aversion 3 3 4 5 Political concerns in the region Operational flexibility Cost management 4 5 6 1 2 2
Key Business Risks 2010 Decline in investors trust Risk management enforcement Operational flexibility Increased regulatory focus Cost management Global economic downturn 1 2 3 4 5 6
Key Business Risks 2009 Global economic downturn Prolonged reduction in investors' risk appetite Valuations Risk management enforcement Decline in investors trust Business model redundancy
Conclusion
The gradual recovery in Islamic funds industry in 2010 will be seriously tested going forward by weakening global economic situation Fixed income, commodity and money market funds are likely to be Islamic investors focus in an uncertain market Islamic fund managers have to achieve scale or perish
27
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ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
Q&A with Islamic fund managers Hear it from the horses mouth
Fund managers have been forced by the market to become more transparent. They are working on improving compliance, internal audit systems and risk management, and also on projecting this change to their clients Fund Manager, Kuwait
Q&A with Islamic fund managers Hear it from the horses mouth(contd)
Q: What would you like to see change in the industry to ensure sustainable long term growth?
Four factors involvement of institutional players, asset managers performance track record, availability and distribution of products, passage of time Fund Manager, GCC
Further improvement in regulatory environment; KSA is a case in point where appropriate regulatory response has helped the industry tremendously - Fund Manager, Kuwait
Q&A with Islamic fund managers Hear it from the horses mouth(contd)
Islamic funds are built for domestic clientele, they are not sellable globally, limiting customer base Fund Manager, GCC
Institutional players like large conventional fund managers (from the supply side) and Sovereign Wealth Funds (from the demand side) have not entered the Islamic funds market in a meaningful manner - Fund Manager, GCC
Q&A with Islamic fund managers Hear it from the horses mouth(contd)
The success of Islamic funds industry should be assessed on a market to market basis. For example, Islamic funds are more popular than conventional funds in both Malaysia and Saudi Arabia Fund Manager, GCC
Boutique asset managers are not primary targets for M&A because they have not been successful - Fund Manager, KSA
33
Shari'a compliant funds must appoint at least three Shari'a scholars to the Sharia Board according to AAOIFI standards The scholars are responsible for issuing Fatwas related to the permissibility of the fund structure and investments
Screening must be performed to ensure compliance with Shari'a The first level of screening removes any companies involved in non-Shari'a compliant industries and businesses The second level of screening involves removing companies with financial ratios exceeding the acceptable levels
Non-Shari'a compliant income must be purified Shari'a board input is essential in determining the type of income to be purified Purification is through donation to charitable institutions
Appointment of a Shari'a Board Shari'a Compliant Investment Key Differences The Purification of Income
In case of a failed trade, interest cannot be charged An alternative approach such as the imposition of a fee may be allowed
Conducting regular Shari'a audits for the fund is crucial to ensure compliance with Shari'a The Shari'a audit can be performed by the Shari'a board or an external third party
Failed Trade
The The
custodian does not have to be an Islamic institution but must adhere to Shari'a principles administrator must prepare fund accounts in accordance with AAOIFI standards
34
ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
35
Islamic funds industry is concentrated in the GCC and Malaysia but choices of fund domicile vary
Global Islamic Funds by Home Country of Asset Manager (Q1 2011)
.3 .1
.1 9
.1
.6
USA ~3.5
.2
.1 1
.7
.1
.2 .2
4.4
Malaysia ~5.6
.7 .3 .7 .1
Note: Funds per country include those managed by players headquartered in that respective jurisdiction. Boxes show total AuM of Islamic funds in US$.
Financial centers across the globe are vying to become domiciles of choice for Islamic funds
Malta* -
Malaysia
US$ 5.0b 171
Cayman Islands US$ 4.13b 57 Saudi Arabia US$ 19.9b 225 Mauritius US$ 0.14b 3 Singapore US$ 0.72b 10
37
Jurisdiction Overview
Bahrain
The government is keen to promote Bahrain as the centre of excellence for Islamic funds and has been very flexible and open to increasing the range and number of Collective Investment Schemes domiciled and operating in Bahrain. The country also has a strong Islamic finance infrastructure in place; it is home to Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and International Islamic Financial Market (IIFM). Currently, Bahrain has a total of US$ 2.15 billion in Islamic assets under management.
Cayman Islands
The Cayman Islands, the most recognized offshore financial center for fund establishment, has also become popular for Islamic funds. It offers a reliable legal system, availability of world-class professional services, an anti-money laundering and well-regulated culture, mechanisms to ensure speed of establishment and flexibility in fund structures and products. In addition, funds are allowed to submit financial statements and notifications in Arabic. Cayman Islands has a total of US$ 4.6 billion Islamic assets under management.
Jurisdiction Overview
Dubai (UAE)
Dubai International Financial Centre (DIFC) has been established with the objective to position Dubai as a recognized hub for institutional finance. The positive regulatory features for fund registration offered by DIFC include permission of 100 per cent foreign ownership, no restrictions on capital/profit repatriation, high regulatory standards, strict supervision and enforcement of money laundering laws. Further cutting down of costs for fund management is under consideration to increase its attractiveness. Currently, DIFC has a total of US$ 0.58 billion in Islamic assets under management.
Ireland
The Irish government in its endeavor to project Dublin as a global centre for Islamic funds has been organizing seminars to educate prospective managers on the benefits of domiciling their fund in Ireland. Irelands reputation as a domicile of choice has been driven by the enormous wealth of expertise across the entire service provider community including firms providing back and middle office support, investment managers, lawyers, auditors, the Irish Stock Exchange and other industry specialists. Currently, 24 Islamic funds are domiciled in Ireland with an estimated AUM of US$ 0.23 billion.
Jurisdiction Overview
Luxembourg
Luxembourg is being promoted aggressively by the government as a European hub for Islamic funds. The regulator is recognized for having a highly proactive and flexible attitude towards the launching of funds. Currently, Luxembourg has a total of US$ 0.58 billion Islamic assets under management.
Malaysia
Malaysia established the Malaysia International Islamic Financial Centre (MIFC) in 2006, which was an initiative undertaken by the government, regulatory authorities and the private sector to jointly project Malaysia as a global hub for sukuk origination, Islamic fund management, Islamic banking, Takaful and human capital development. Currently, Islamic funds registered in Malaysia have total assets under management of US$ 5.1 billion.
Jurisdiction Overview
Malta
The Maltese government has expressed a specific interest in promoting the launch of Islamic funds. Recently through the issuance of a Guidance Note for Shari 'a-compliant funds the regulator, Maltese Financial Services Authority (MFSA), has laid out the details of the support to parties looking for a suitable domicile to launch an Islamic fund. A number of registration applications for Islamic funds have been received so far.
Mauritius
The Mauritian government in collaboration with the private sector has been involved in projecting Mauritius as an ideal location for the development of Islamic finance and Islamic fund management. In 2007, the Finance Act 2007 amended the Banking Act 2004 to facilitate Islamic banking and finance by Mauritian commercial banks. Currently, Mauritius has total assets under management of US$ 0.12 billion.
41
Jurisdiction Overview
Saudi Arabia
In 2005, the regulatory authority passed a regulation calling for the separation of asset management and investment banking operations into distinct business entities. Saudi Arabia has Islamic funds with AUM of US$ 22.7 billion.
Singapore
Singapore, as an established financial services centre in the Far East region, has a well-defined framework for fund management. Over the years, Singapore has revised its regulatory framework and tax structure to facilitate various Shari' a-compliant financial products. Islamic funds domiciled in Singapore have total assets under management of US$ 0.76 billion.
42
ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
43
Ernst & Youngs Leadership Team - Islamic Funds and Investments Report
Ashar Nazim Sohaib Umar Ken Eglinton Pierre Weimerskirch Abdul Rauf Rashid
+973 1751 2808 +973 1751 2807 +44 207 951 2061 +352 42 124 8312 +603 7495 8728
Survey Methodology Our survey sought to identify key trends and business risks for the global Islamic asset management industry through in-depth interviews with executives and industry observers. These discussions were used to gauge business sentiment and identify key areas for inquiry. Interviews were conducted in March and April of 2011. Interviews centered on four main topics of discussion, namely: State of the industry Demand side factors Supply side dynamics Business risks
Business Risk Ratings Ernst & Young subject matter experts developed a list of Islamic asset management business risks and contributing factors. All interviewees were provided with this list of business risks and requested to rate each to reflect its severity to their respective business over the coming 12 months. Interviewees were also asked to add any additional risks they felt were important. The results of this rating process were tallied and a relative ranking assigned to each. This rank formed the basis for our comparative study with 2009 and 2010 results. Acknowledgement, Anonymity and Quotes We would like to thank all those interviewees that agreed to contribute to our report. Quotations have been used to support arguments made in the report.
45
Ernst & Youngs Project Team Ashar Nazim Sohaib Umar Sana Mirza
For questions or comments, please contact Sohaib Umar at +973 1751 2807 sohaib.umar@bh.ey.com
Bloomberg Central Banks Websites Company Annual Reports Datamonitor Global Wealth Model EFAMA Eurekahedge Global Insight Investing in the GCC Markets: New Opportunities in a Changing Landscape Investment Company Institute Islamic Finance News Merrill Lynch National Mutual Fund Association Pew Research Center Watson Wyatt World Wealth Report 2010 Zawya
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ISLAMIC FUNDS & INVESTMENTS REPORT 2011: AChIEVING GROWTh IN ChALLENGING TIMES
Shaping the Future of the Global Islamic Finance Industry Since 1993 2 Decades of Supporting the Market Leaders MEGA is the leading international information firm focused on achieving business results for the Islamic banking & finance industry since 1993. Our exclusive focus on Islamic finance has enabled us to create significant value for the leading players in the Islamic banking, finance and investment markets. The portfolio of MEGA brands represents the landmark industry conferences and our clients are the leading players in the international financial markets. Partnering with Governments and the Industry Thought Leaders Our Strategic Partners are world leaders in their respective fields and include key government finance and regulatory agencies such as the Central Bank of Bahrain, Dubai International Financial Centre, UK Trade & Investment, the Monetary Authority of Singapore and the Economic Development Board of Bahrain. These and our other strategic alliances with international thought leaders including Ernst & Young and global strategy advisory firm McKinsey & Company further strengthen MEGAs brand leadership position by providing original new research insights on the Islamic finance industry worldwide. Investing in Our Brands: Number 1 in Each of Our Markets MEGA continues to grow its portfolio of Islamic finance brands to further extend our leadership position across the Banking, Takaful, Funds, Capital Markets, and Project Finance segments. Each brand is successfully developed over many years in order to further cement its number 1 position in its respective market. In 1994 we founded the World Islamic Banking Conference (WIBC), which at the time was one of the first conferences in the world to focus on this nascent industry. That first year we had 120 pioneering delegates and one sponsor. Today, fast approaching 2 decades later and with more than 1,200 delegates from over 50 countries attending the conference each year, WIBC is an iconic brand internationally recognised as the worlds largest gathering of Islamic finance leaders. A World Stage: Genuinely Global Dialogues MEGA brands have a genuinely global reach across the Islamic finance industry. An initiative to further broaden this international representation The World Comes to WIBC was launched at WIBC 2007 and has grown to now feature a British Pavilion led by UKTI and comprising 18 British-based banks. 2008 saw us further extending this programme to Asia, in partnership with the Monetary Authority of Singapore, which resulted in a high-profile Singapore delegation led by the MAS Governor. A number of leading international Islamic banking groups also now convene their annual board meetings along the sidelines of WIBC. Understanding Client Needs & Delivering Long-Term Value MEGAs leadership position has come as a result of our relentless focus on the constantly changing needs of our clients as the Islamic finance industry has grown and matured. Whether it be the challenges of launching a new bank, a new investment fund, an innovative new retail financial product or raising corporate profile in a key target market, we ensure that our offerings are closely aligned to the immediate business priorities of our clients. Then we make sure that we deliver on our promises and that is why the market leaders come back and work with us year after year. Our genuine value creation is highlighted by our long-term relationship with Ernst & Young who have worked with us continuously since the inception of the World Islamic Banking Conference 17 years ago - and who are also now our partners across the portfolio of MEGA brands.
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2011 The Ernst & Young Islamic Funds and Investments Report is documented for the World Islamic Funds and Financial Markets Conference. No part of this document may be republished, distributed, retransmitted, cited or quoted without the prior written permission from MEGA.
WIFFMC is a MEGA Brand MEGA Brands: Shaping the Future of the Global Islamic Finance Industry Since 1993 P.O. Box 72045, Dubai, UAE | t. +9714 343 1200 | f+971 4 343 6003 MEGA Brands. MEGA Clients. Market Leaders. www.megaevents.net