According to Fitch Ratings, the growth rate of Islamic funds is outpacing the overall market

According to Fitch Ratings, the growth rate of Islamic funds' assets has outpaced that of the broader mutual fund industry.

According to Fitch Ratings, the growth rate of Islamic funds' assets has outpaced that of the broader mutual fund industry.


Assets under management in Islamic mutual funds have increased "substantially" according to the firm, peaking at around $130 billion at the end of Q2 last year before falling to around $120 billion by the end of the year.


Nonetheless, Islamic funds grew at a rate of 84 percent nominally and 13 percent annually, outpacing the global mutual fund industry, which grew at 68 percent nominally and 11 percent annually.

Saudi Arabia and Malaysia, according to the report by Alastair Sewell and Bashar Al Natoor, remain the world's preeminent Islamic fund domiciles because they already have well-established markets.


According to Sewell and Al Natoor: "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 Sharia status, whilst Luxembourg has a broader Islamic mutual fund base, Jersey is a hub for Islamic exchange-traded funds (ETFs), with multiple commodity ETFs (particularly gold ETFs) claiming Sharia compliance, while Luxembourg has a larger Islamic mutual fund base. "


Money market funds dominated in terms of Islamic fund type, owing to the fact that Saudi Arabia is the largest Islamic fund domicile and MMFs are the most common fund type in the country.


Over 80% of Saudi Arabia's Islamic fund AUM was invested in MMFs by the end of Q4 last year, while equity funds represented the largest segment in Malaysia, accounting for 44% of total AUM.


"Structural and legal characteristics of the assets held by Islamic funds can cause additional rating complexities, notably in the case of defaults in portfolio holdings." according to the report.

By fLEXI tEAM