Ernst & Young: Islamic funds set to gain from robust growth, liquidity

Robust macroeconomic growth and liquidity as well as rising affluence offer Islamic funds enough room to grow in the GCC region, according to global consultant Ernst and Young (E&Y). Strong demand from institutions, need for diversified investments and the low penetration levels will also play key roles, says the consultant.Volumes of Islamic bonds or sukuks are expanding, thus presenting opportunities for fixed income asset class, but there is still a need for deepening the market and Islamic wealth management should look at hedge funds for their future growth, says E&Y. Though the number of Islamic funds available is on the rise, a half of them were relatively small with less than $50mn assets under management, E&Y’s The Islamic Funds & Investments Report says.Hence, critical success factors for a new entrant include product development, client relationship management, operational efficiency, competitiveness vis-à-vis established and multinational players and distribution network.“Macroeconomic growth in the (GCC) region has been robust on the back of strong oil prices and diversification,” the report says, adding growth has trickled down to individual and institutional investor segments.The report finds that when the oil prices registered a compounded annual average growth (CAGR) of 14% between 2000 and 2006, the GCC region’s nominal GDP grew by 19%.

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