Islamic funds outperform conventional ones in 2007

Shariah-compliant investment funds outperformed conventional ones last year and totalled more than $19 billion (Dh70bn) in assets.

The Dow Jones Islamic Market (DJIM) World Index, for example, recorded a gain of 17.2 per cent in the third quarter of 2007 compared to DJIM US which rose by 15 per cent.

Islamic funds have escaped the worst of the economic turmoil that has left Western banks reeling from the credit crunch, high write-downs for bad debt, falling market valuations and bad decision-making.

That is because investing in banks is not considered halal under Shariah principles and is therefore largely prohibited.

“Overall Islamic funds have outperformed the conventional funds in 2007,” Mark Smyth, managing director of research firm Failaka, told Emirates Business.

“The Islamic fund market has tripled in size over the past five years with much of the growth coming from Gulf investors and directed towards funds investing in the GCC markets.

“More than 50 per cent of the funds are invested in the GCC, about 30 per cent are in Asia – primarily Malaysia – and the rest are sprinkled in the US and Europe.

“Funds investing in the GCC markets represent over half the entire Islamic equity fund industry. This is where the growth in the industry has come from. Five years ago there were only a few funds investing in the GCC but today there are more than 50."
Smyth said the numbers still told a relatively small story as Islamic funds were equal to less than one per cent of the total value of the world’s conventional investment funds.

“But the growth has been steady and gradual both in the number of funds and the amount of assets,” he added.Investment funds form only a part of the whole Islamic financial market, which has grown dramatically in recent years.

Uae And Saudi Firms Shine At Failaka Awards

Firms from the UAE and Saudi Arabia dominated the third Failaka Islamic Fund Awards held in Dubai last night.

The awards, presented for the best performance or the most noteworthy achievement, have been coveted by financial institutions and their fund managers as a high-water mark in their careers.

Out of the 21 categories, five firms from Saudi and four from the UAE went home with the laurels. This year’s awards saw the addition of new categories that include a one-year, three-year and in some cases a five-year performance award.

“This is a reflection of the increasing transparency and availability of information from fund managers and thus a reflection on the growth of the market generally,” a Failaka spokesman said.

The award for Best Islamic Fund Manager in the GCC was awarded to NCB Capital of Bahrain, while the title for the United States and Asia regions were awarded to Saturna Capital of the US and Public Mutual – Malaysia, respectively.