Assets of Islamic equity funds approach $20bn

Last year was a particularly good year for Islamic equity funds with markets in the Gulf Co-operation Council (GCC) countries performing well compared with 2006, which saw some markets lose over half their value.

By the end of 2007, the industry for the first time approached $20bn in assets, according to Failaka Advisors. "The size of this market has tripled over the past five years," says Tariq Al-Rifai, Failaka's Chairman.

Much of this growth came from GCC investors and directed towards funds investing in GCC markets, according to Mark Smyth, Failaka's Managing Director. Funds investing in GCC markets represent over half the entire Islamic equity fund industry.

"This is where the growth in the industry has come from," said Smyth. "Five years ago there were only a few funds investing in the GCC, but today there are over 50."

The Islamic fund industry is global, however, and Saudi funds and Saudi fund managers dominate the industry. They have the largest number of funds on the market in the GCC. There are over 300 Islamic equity funds today and approximately 125 are based in Asia and 120 in the GCC. Of the 120 funds in the GCC, nearly 75 are in Saudi Arabia alone, according to Failaka.

Bahrain is becoming the centre for fund registrations in the Gulf, with both Kuwait and Saudi firms registering their funds in Bahrain to take advantage of the Kingdom's world-class regulatory system. Global Investment House of Kuwait and the National Commercial Bank of Saudi Arabia have setup fund management operations in Bahrain recently.

Dubai, on the other hand, has been attracting global investment firms with Islamic investment divisions. Some of the best performing Islamic equity funds are from global investment firms operating out of Dubai, such as Permal and DWS, a division of Deutsche Bank.

As for fund performance, Islamic funds have given investors excellent returns over the years. Failaka Advisors will be awarding the best performing Islamic funds at its 3rd Annual Islamic Fund Awards ceremony being held it Dubai on 24 March 2008.

Failaka will be giving awards in 20 different categories and recognising the best performers last year as well as top performers over the long term.

"We always wanted to highlight the world-class investments and returns Islamic funds have to offer, and now investment companies from around the world are paying attention," said Al-Rifai

Assessing the likely outcome of this year's awards, Smyth said: "This year, Saudi funds will dominate the award ceremony and will be tough to beat in 2008."

He likes Riyad Bank, The Saudi British Bank and Banque Saudi Fransi in Saudi Arabia. In the UAE he likes DWS Investments and SHUAA Capital. In Kuwait, National Investments Company and Al Madar Finance and Investment in Kuwait and Al-Tawfeek Company for Investment Funds impress, along with TAIB Bank in Bahrain, whose managers' have shown an excellent track record and performance over the past three years.