Sharia mutual funds set to blossom

Growth of sharia-based mutual funds will far exceed that of conventional mutual funds this year due to steadily rising public appreciation and demand, according to an industry player.

"For this year, national mutual funds are forecast to grow by about 20 percent and sharia mutual funds are forecast to grow by far more than that," Fortis Investments president director Eko P. Pratomo said during the launch of the company's latest sharia product.

In the first quarter alone, sharia mutual funds grew by 31.6 percent, valued at Rp 2.9 trillion, compared with a 2.12 percent growth in conventional funds, with a value of Rp 93.1 trillion.

By the end of 2007, total funds managed in sharia mutual funds reached Rp 2.2 trillion, while conventional funds reached Rp 91.15 trillion.

Eko said the high growth in sharia funds was partly because the amount of managed funds in the industry was still relatively small, while its potential was huge.

"We're optimistic sharia mutual funds will continue to grow rapidly, especially since the Islamic bonds -- or sukuk -- were launched in the second semester of this year," Eko said.

Last week, the House of Representatives approved the Islamic bond law in an effort to attract investors from Middle Eastern countries.

The law also covers portfolios of other sharia-based financial investment instruments.

Globally, it is estimated the sharia fund industry grows by 15 percent each year, making it one of the most active and fast-growing assets in the international investment landscape.

Eko said Fortis Investment expected to record a 27.3 percent growth in its managed funds, in line with the national growth of mutual funds.

"Our target is to have Rp 28 trillion worth of funds under our management," he said.

Last year, the company reached total funds of Rp 22 trillion, a 228 percent increase from Rp 6.7 trillion a year earlier.