Wealth from GCC investors will add more than $70bn to the Islamic fund universe
HSBC Amanah Securities Services, part of HSBC Holdings, will more than double the value of the Islamic funds it services to exceed $10bn after it helps to set up funds in the next 12 to 18 months.
Demand for Islamic funds has risen in the past three to six months as the global economic slowdown prompted investors to seek alternative investments to help manage risk, according to Germain Birgen, Luxembourg-based global head of HSBC Amanah Securities. The unit will help set up more than 30 Sharia-compliant funds globally.
About $10 trillion was wiped from the value of global equities in the third quarter amid concern a worsening European debt crisis will derail global growth. Sharia law forbids gambling, investments in alcohol and receipt of interest, so fund managers have to select investments deemed halal, or permissible.
“Islamic funds are not exposed to the same level of derivative techniques as conventional funds,” he said in a telephone interview from Luxembourg today. “Conventional institutional managers, targeting institutional investors such as pension funds or insurance companies, are investing in socially responsible investments, which in most markets, Islamic funds fall under that category,” he said.
HSBC Amanah Securities has received a growing number of queries for Islamic funds from clients in countries, such as Australia, South Africa and Brazil, he said. “One project coming from Brazil relates to a private equity fund investing into farming, Brazil being one of the world’s biggest exporter of halal meat,” Birgen said.
Wealth from investors in the Gulf Cooperation Council will add more than $70bn to the so-called addressable Islamic fund universe by 2013, Ernst & Young MENA said last month.
“Increasingly, people are seeing the value in attracting the world’s Muslim wealth with such funds,” Birgen said. “With the current size of the industry, there aren’t enough funds.”
HSBC Amanah Securities services 90 funds in 12 domiciles valued at about $5bn, a tenth of the Sharia-complaint fund industry, Birgen said. Mature fund markets, such as Malaysia and Saudi Arabia, target mainly local investors, he said. The new funds will help attract “large, conventional players” worldwide.
The unit will help establish some of the funds in Luxembourg, Ireland and Singapore, where regulations are more familiar to international investors, he said.