Islamic funds recovered slightly in the first four months of the year after losing more than 10 percent of their asset base last year, according to research firm Eurekahedge.
Assets under management of the Shariah-compliant funds – which are prohibited from investing in alcohol, pork, pornography and gambling – rose $1.92 bn in the first four months of 2014 after dropping by about $10 bn in all of 2013, the firm says. Assets under management of the 829 funds totaled $88.58 bn as of the end of April.
Performance-based gains accounted for $1.56 bn of the increase, while only a small portion is attributable to fresh investment after the 2013 decline spurred by the cutbacks in quantitative easing by the US Federal Reserve and increasing volatility that hit many emerging markets. The 2013 drop marked a shift from 2012, when inflows totaled $7 bn.
The Eurekahedge Islamic Fund Index rose 3.93 percent in the first four months of this year and the research firm predicts further gains in 2014 after last year’s setback. It forecasts that the broader Islamic finance industry – of which Islamic funds make up only 5 percent – will continue.
‘Shariah-compliant funds continued their long-term trend of growth in 2014 despite a tough start to the year,’ the firm says in a note to clients. ‘Judging from current growth trends, global Islamic finance assets are projected to breach the $2 tn mark by the end of 2015.’
EY’s ‘World Islamic Banking Competitiveness 2013-14’ report also predicts continued growth, with the overall Islamic banking sector set to double in size to $3.4 tn in 2018. EY says, however, that growth is dependent on economic stability, capacity building at the larger Islamic banks and greater connectivity across high-growth markets.
