Shariah-compliant funds: A whole new investment opportunity according to PwC at the launch of its latest publication on Shariah-compliant funds

With the global financial crisis taking its toll, it is likely that more funds will be investing in Shariah-compliant funds in the future. The market for these type of investment products is growing at about 15-20% per annum and equity fund assets alone are forecast to jump from US$15bn in 2008 to US$53bn in 2010. A number of structural and behavioural changes in Islamic countries have produced this take-off and the probability is that the sector will now go from strength-to-strength. The single most important factor behind this powerful growth lies in the simple fact that Muslims represent about a quarter of the world’s population, yet at the same time they only represent 1% of global financial assets in Shariah-compliant investments. Consequently, many asset management firms are now launching, or planning to launch such funds.

Launching PwC’s new publication “Shariah-compliant funds: A whole new world of investment” Ken Owens, Partner, PwC Islamic Funds Practice said:

“The growth potential for Shariah-compliant and Islamic Funds offers Ireland a huge opportunity to act as a centre of excellence for these fund administrators. With Ireland’s business friendly approach and our great talent pool and expertise, every such fund established in Ireland’s IFSC is estimated to create one and a half jobs. Therefore, this is an area capable of providing Ireland with significant employment opportunities into the future.”

Omer Khan, Islamic Finance Consultant, PwC added:

“With over 20 professionals based in PwC Dublin specialising in Islamic Finance, we know and understand this very specific market. We can advise fund managers on how to set up Shariah investment products right here at the IFSC. The experience with these type of investment products is likely to be exciting for those participating and the rewards attractive.”

Ken Owens concluded:

“Funds structured on Shariah principals provide conventional asset managers with a new pool of investors. The relative infancy of the sector is evident by the lack of Shariah-compliant products being offered by asset managers. However, as the technical gap narrows and as new products are developed, the market participants that are involved in this initial development phase of Shariah-compliant funds are likely to derive significant benefits.”

Ends

Notes to Editor:

2. Principal features of a Shariah fund include:

They operate under the principal of Islam and the Koran

Each fund must have an appointed Shariah Board, which is comprised of scholars. Interestingly, there are only 100 such scholars worldwide who are qualified to sit on Shariah Boards. These are highly respected and learned individuals

The activities of the fund are carefully screened and any income derived from non-permissible activities is given to charity
The funds have a strict set of rules applying to them as to what the can and cannot invest in. For example, investing in derivatives, alcohol and tobacco are forbidden.

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