The biggest sharia managers in Southeast Asia

Southeast Asia's sharia investment industry in shrank last year in line with the trend globally, according to AsianInvestor data, but there area solid reasons to believe steady growth will resume.

The 20 largest managers of Islamic funds in Southeast Asia saw an 8% drop in sharia assets under management to $26.2 billion last year, a smaller decline than the 12.2% fall to $84 billion globally.*

AsianInvestor compiled this data* as part of its annual project to identify the 50 largest managers of Islamic assets, with the Middle East and Southeast Asia the most important regions in terms of AUM. Last week we published the global figures and a feature providing background on the segment globally.

The drop in Southeast Asia was largely driven by equity assets, which declined 11% to $13.3 billion, while sukuk/money-market assets fell 4% to $11.7 billion. Alternative investments form a far smaller proportion of the sharia universe in the region that they do in, for instance, the Middle East.

Most fund houses in Southeast Asia saw falls in their sharia AUM, including the two biggest Malaysian players, Public Mutual and CIMB Islamic. However, there were a few notable positive growth stories, such as Maybank Asset Management and Hong Leong Asset Management.

It’s important to bear in mind that the figures in our list are expressed in dollars. The numbers posted by Malaysian asset managers were therefore negatively affected by the 20% decline in the ringgit against the dollar last year.

Malaysia’s largest state retirement fund, the Employees Provident Fund, will roll out its plan to ringfence RM100 billion ($24.7 billion) to RM120 billion of its RM675 billion portfolio as fully sharia-compliant. From 2017, scheme members will be able to choose to have their pension assets managed on a purely sharia basis. 

Moreover, Malaysia’s RM120 billion civil service retirement fund, KWAP, is formulating similar plans, and more pension plans in the country are expected to follow.

There are also promising signs for Islamic investing in Indonesia and Brunei, said Akmal Hassan, managing director at AIIMAN, Affin Hwang’s Islamic business. Indonesian regulators amended regulations in January to allow sharia funds to invest up to 100% of their portfolios in foreign assets (the previous limit was 50%). Fund houses, including Aberdeen, BNP Paribas and Schroders, are now set to launch sharia equity funds with a global focus.

Meanwhile, Brunei introduced sharia investment law in 2014, and the Sultan is seeking to encourage sharia practices.

Of course, the building out of staffing infrastructure to support faster development of Islamic asset management will take time. There are still relatively few people working in asset management in Southeast Asia who are dedicated to Islamic investing, despite the need for at least one sharia specialist in each area of the organisation, from the front- to the back-office.  

The figures were compiled by Bernice Cornforth. The full feature appears in the latest (March 2016) issue of AsianInvestor.