Record oil prices spark boom for Islamic funds

FUND BOOM: Ernst & Young said the number of Islamic funds could double to 1,000 by 2010. (Getty Images)

The number of Islamic funds worldwide could double to 1,000 by 2010, driven by growth in sharia sensitive assets controlled by investors in the GCC and Far East, Ernst & Young said on Monday.

The global professional services firm said in a report sharia sensitive assets held by investors in these region's had growth to $267 billion on the back of record oil prices, which touched a fresh all-time high above $135 a barrel last week.

Ernst & Young said the number of sharia compliant funds worldwide grew by 153 last year to over 500 currently.

The growth in sharia sensitive assets had created a potential annual revenue pool of $1.34 billion for the Islamic asset management industry, it said.

Ernst & Young said growth in the industry was being driven by Saudi Arabia and Malaysia, the two largest markets for Islamic asset management, with Saudi home to 120 Islamic mutual funds and Malaysia home to 134.

"At a time when the GCC is enjoying unprecedented oil revenues, Islamic asset management will only gain more significance on the world stage," Sameer Abdi, head of Ernst & Young’s Islamic Finance Services Group, said in a statement.

However, Ernst & Young warned that the industry lacked depth in terms of both geographies and asset classes, and that human resource constraints continued to be a risk to the industry.

"The industry is still in its early growth stages as the Islamic funds landscape exhibits a number of gaps and lacks depth in some asset classes," Abdi said.

"But there are many ways in which market participants can prepare themselves to benefit from this sector as it matures.”

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