Public Islamic assets under management to snap back

Assets under management (AUM) of public Islamic funds are expected to return to their 2021 peak in the next two to three years, a new report has found. 

In 2021, assets under management of public Islamic funds peaked to around $140 billion. 

“We forecast lower interest rates (US policy rate 2024F: 4.75%; 2025F: 3.5%), which will likely increase appetite for investments in emerging markets, including Islamic funds,” Fitch Ratings said. 

The Federal Reserve announced on Wednesday it would leave the benchmark interest rate of 5.25% to 5.5% unchanged, a call widely expected by economists. 

Public Islamic funds held more than $111 billion in AUM at the end of last year, concentrated in Malaysia (28.3%), Ireland (18.1%) and Saudi Arabia (17.2%). 

Malaysia also leads the pack in terms of Islamic funds by count, accounting for 36.8%, followed by Indonesia (16.9%), Pakistan (15.3%) and Saudi Arabia (12.8%). This classification is based on the funds’ domiciled country and Lipper data, which may not capture all private funds.

Bashar Al-Natoor, Islamic finance chief at Fitch Ratings said that the fund management industry is still in relatively early stages of development in the GCC and underdeveloped in most OIC countries, barring Malaysia. 

“Islamic funds are even at an earlier stage of development due to limited products, lack of economies of scale, differences in Sharia interpretation and shortage of human capital,” he added. 

Islamic funds were close to 80% of total public funds across GCC countries at the end of 2023, supported by demand from Sharia-sensitive investors, with balance by conventional funds. 

Equity funds made up the largest public Islamic funds by AUM at 36.3%, followed by money market funds (20.9%) and sukuk funds (10%).