Gulf wealth to add $70bn to Islamic funds by 2013

Wealth from investors in the Gulf will add more than $70bn to Islamic funds by 2013, Ernst & Young MENA said on Monday.

According to the annual Ernst & Young Islamic Funds & Investments Report, global Islamic fund assets under management grew by 7.6 percent to $58bn in 2010 led by Saudi Arabia, up from $53.9bn in 2009.

The growth was largely due to market performance and partially on account of new money inflows, the report added.

Concentration in equities remained, as they accounted for 39 percent of the $58bn, but bringing new money into equities proved challenging, it said.

Fixed income, commodities and alternatives did well in 2010, which was a record year for sukuk with issuance of $50 billion, according to Ernst & Young.

Shariah funds may struggle to boost assets this year and in 2012 due to the “increasing likelihood of sovereign debt crisis in Europe and a double dip recession in the US,” Ashar Nazim, Islamic financial services leader at Ernst & Young wrote in the report.

A total of 23 new Islamic funds were launched in 2010 while 46 were liquidated.

Nazim said: “Growth in 2010 is welcome given the industry’s flat performance since 2007. Looking ahead, the challenging times are by no means over.”

He added: “Even though stock prices in the MENA region are near 2004 levels today, investors are not confident about their rise even in 2012. They remember that equity markets were flat for years before the spike began in 2005.

"The global economic scenario, investors’ risk aversion and the aftermath of the Arab Spring are the top three risks for Islamic fund managers."