index-based investment products that will help drive takaful … tariq... · 2020. 11. 24. ·...
TRANSCRIPT
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential |
Index-Based Investment Products that will Help Drive Takaful Growth
Tariq Al-Rifai
Director – Islamic Market Indexes
13 April 2010
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential | 2
Overview
� Structure of Islamic finance
� Current snapshot of Islamic finance
� Products offered
� Islamic fund market
� How ETFs are redefining the fund industry
� Reaching critical mass
� What’s driving the market today
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential | 3
A. Structures of Islamic finance
Islamic Finance
Islamic Fund Management
Takaful (Insurance)
IslamicBanking
Capital MarketsCommercialBanking
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential | 4
Industry snapshot
� In the middle of the 1970s, growing wealth and increasing influence in the global
economy inspired Muslims to develop a new financial system that complied with
Islamic philosophy.
� Today there are approximately 600 Islamic financial institutions operating around
the world, including banks, mutual fund providers, and issuers of Takaful - Islamic
insurance.
� Islamic financial institutions control at least $650 billion in worldwide assets
(estimated).
� There is less than $20 billion in Islamic equity funds comprising over 300 funds
and only 8 Islamic ETFs (exchange traded funds)
� There are an additional 300+ Islamic funds from various other asset classes
including, short-term trading instruments, sukuk, real estate and private equity
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential | 5
Products offered
� Banking products:Savings and current accounts (including wadi’ahs), murabaha and
investment accounts, time deposits
� Funds:Ijara funds, equity funds, real estate funds, commodity funds, private equity, hedge funds, sukuk funds, exchange-traded funds (ETFs)
� Private banking and wealth management services
� Structured products (index-linked and others)
� Takaful (Islamic insurance)
� Stock-trading and brokering services
� Derivatives (such as arboun, tawarruk, dual-wa’ad)
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential |
Islamic Fund market
Islamic Fund Market AUM ($ billions)
16,217 , 40%
6,399 , 16%
5,196 , 13%
3,919 , 10%
8,599 , 21%
Equity Fixed Income Real Estate and PE Commodities Other
Source: Ernst & Young, Islamic Funds and Investment Report 2009
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential |
Islamic Fund market
AUM by Country (% of total market)
USA
4%
KSA
48%
Kuwait
9%
Malaysia
11%
Bahrain
3%
UAE
14%
Other
11%
Source: Ernst & Young, Islamic Funds and Investment Report 2009
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential |
Islamic Fund market
Number of Funds by AUM
-
50
100
150
200
250
300
<20 20-50 50-100 100-200 200-300 300-500 >500
AUM ($ millions)
No
. o
f F
un
ds
Source: Ernst & Young, Islamic Funds and Investment Report 2009
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential |
ETFs are redefining the fund industry
Why are investors around the world increasingly investing in ETFs:
� Passive investing has been proven to outperform active funds over the long term.
� ETFs are an efficient low-cost way to invest in equities.
� Since ETFs must track an index, the rules are clear and transparent leaving investors with peace-of-mind.
� ETFs are an attractive tool that lets investors from around the world access local markets.
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential |
ETF assets under management by region
Source: Blackrock
USA
68%
Asia Pacific
6%
Other
0%
South America
4%
Europe
22%
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential |
ETFs are redefining the fund industry
Source: Blackrock
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential |
Exchanges where ETFs are currently listed
Source: Blackrock
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential | 13
How will Islamic finance reach critical mass?
� Attract a non-traditional client base (i.e. non-Muslims)
� Simplified Product Development
- Assess clients needs or market demand first- Look out for client interest first (watch out for high fees)
� Opening New Delivery Channels- Wealth managers
- Fund supermarkets
- “Open-architecture”
� Developing Core Products
- Basic market needs have not yet been met
(equity funds, ETFs, income funds, long-term savings solutions)
� Client Education
- Create new demand by educating your target market
� Tapping New Markets
- Takaful today represents greatest untapped potential in Islamic finance
Proprietary and Confidential |© Copyright 2010 Dow Jones and Company, Inc. Proprietary and Confidential |
What’s driving the Islamic market today?
� In the GCC, local and regional investments only
� Exchange traded funds (ETFs)
� Structured products based on an index
� Sukuk and sukuk funds
� Some/growing interest in commodity funds
� Unmet demand for fixed-income products especially for Takaful companies
� Back to basics investing styles, nothing complex or difficult toexplain; hedge funds and derivative-type products have never worked in Islamic finance