Assets under management (AUM) in Islamic (or Shariah-compliant) mutual funds have increased substantially, according to a new report by Fitch Ratings.
AUM peaked at end-Q2 2021 at around US$130bn, before falling to around US$120bn at end-2021.
Fitch estimates that the growth rate of Islamic funds (84% nominal/13% annualised) has exceeded that of the broader global mutual fund industry (68% nominal/11% annualised), based on the latest comparable data for the five years to end-Q3 2021, which is based on Lipper and ICI Global data.
Saudi Arabia and Malaysia remain the pre-eminent Islamic fund domiciles worldwide, reflecting strongly established local markets.
Offshore markets, such as Jersey and Luxembourg, also have nascent Islamic fund markets. Jersey is an Islamic exchange-traded fund (ETF) hub, where multiple commodity ETFs (notably gold ETFs) claim Shariah status, while Luxembourg has a broader Islamic mutual fund base.
Money market funds (MMFs) are the largest Islamic fund type. This is largely driven by the fact that Saudi Arabia is the largest Islamic fund domicile and MMFs are the dominant fund type there.
By end-Q4 2021, 83% of Saudi Islamic fund AUM was invested in MMFs. Conversely, Malaysia fund assets are more spread out, with equity funds – the largest segment – representing 44% of total AUM.
