KUALA LUMPUR Jan 12 Malaysia's securities
regulator has proposed establishing a fund to invest in the
country's Islamic finance funds and make them more attractive to
institutional and foreign investors.
The southeast Asian country has carved out a leading role in
Islamic finance. Malaysian asset managers hold 132.4 billion
ringgit ($30 billion) worth of sharia-compliant assets - among
the largest in the world and comparable to Saudi Arabia - but
they have often been overshadowed by a thriving market for
Islamic bonds, or sukuk, which are often bought directly by
The proposed fund, part of an Islamic fund and wealth
management blueprint launched on Thursday by the Securities
Commission, would invest in multi-currency Islamic investment
products managed by Malaysian-based asset managers and including
equity products, to increase their size and make them more
attractive to investors.
The Securities Commission gave no details on the size or
timeframe for the launch of its proposed fund, or who would run
it and where the money would come from, but a fund acting as a
seeder or incubator of Islamic funds would be a first in the
"The Securities Commission is still in discussion with
various stakeholders. No decision has been made on who will
spearhead the fund yet," a spokeswoman for the Commission said.
The fund could address challenges that Islamic funds have
faced in attracting significant institutional money and foreign
investors, the Securities Commission said in the five-year
"The fund is aimed at accelerating efforts to build the
critical mass, establishing channels for international
distribution, and supporting innovation and developing market
infrastructure for alternative strategies," the regulator said.
Investors from the Middle East are the big investors in
Islamic finance but can find Malaysian-ringitt funds less
attractive as their portfolios are denominated in U.S. dollars
or Gulf currencies that are pegged to the dollar.
Few Malaysian-managed funds are offered overseas but this is
starting to change: CIMB Islamic Asset Management, for example,
this week launched an Ireland-domiciled dollar-denominated sukuk
Malaysia's Employees Provident Fund is launching a $25
billion sharia-compliant retirement fund this month, which could
serve as a boon to asset managers in the field.
Smaller fund managers, however, have cast doubt on whether
they would manage any of that money, saying the mandates will
probably go to a handful of more established players.
($1 = 4.4560 ringgit)
(Reporting by Liz Lee and Bernardo Vizcaino; Editing by Susan