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Feb 17, 2015

Islamic funds register modest growth to $91 bn in 2014

Shariah-compliant investing likely to jump as Muslim population ages, says hedge fund analysis firm

Global assets under management by Islamic funds grew slightly last year and are likely set for rapid growth in coming years as the relatively young Muslim population of the world ages, hedge fund analysis firm Eurekahedge says.

Islamic funds grew to $91 bn with net inflows of $3.2 bn, Eurekahedge says in its 2014 review. The funds increased much more sharply in value in the first half of the year but dropped in the second half amid increased market volatility and the plunging price of oil.

Assets under management peaked at about $91 bn in the second half of 2012, but are still up sharply from less than $50 bn at the beginning of 2007, Eurekahedge data shows. At the end of 2014, the number of Islamic funds, which the firm defines as ‘ethical investing’ vehicles, was 877, the highest since Eurekahedge began keeping track in 2007.

‘With Muslims forming a quarter of the world’s population, this is potentially a very large market, yet less than 1 percent of financial assets are Shariah-compliant,’ Eurekahedge says in its report. ‘Indeed, there appears to be a clear supply imbalance and the Islamic fund industry has been growing steadily over the years to accommodate this demand. The industry is projected to grow significantly larger, driven by a younger generation of Muslims who are more open toward investing in financial assets, and also by wider increases in productivity and prosperity.’

The firm says the Islamic finance industry globally now measures about $2 tn, including Islamic banking, sukuk (financial certificates), takaful (insurance) and Islamic funds. Islamic banking accounts for about 80 percent of the sector, while sukuk issuances account for about 15 percent.