The Challenge of Mobilizing Assets
Given the current state of the Islamic
mutual fund industry
Thom Polson – CEO – Falah Capital
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Endowment & Pension Investing
• Allocations are built around growth to cover
expected & recurring withdrawals.
• Planning for recurring payments. Includes
returns, fees, liquidity, and market dynamics.
• Investments have to be globally diversified in
highly regulated and efficient products.
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Islamic Mutual Funds
Active vs. Passive Management. The Fee Effect. Legal Jurisdiction. Three very
important aspects for institutional investors. Are Islamic funds efficient in this way?
Benchmark vs. Islamic Mutual Funds
2014
(9/30)
Total
Return
Annual
Fees
Return vs. Benchmark
Less Fees / Index Product
2012
2013
Russell-IdealRatings Islamic Global Index -4.6%
14.4%
22.7%
5.8%
38.2%
0.7%
35.6%
0.0%
Guernsey Domiciled – Islamic Global
3.9%
12.3%
27.8%
1.4%
45.4%
1.5%
39.8%
4.2%
Luxembourg Domiciled – Islamic Global
-5.0%
14.8%
22.7%
1.9%
34.4%
2.1%
26.4%
-9.2%
Ireland Domiciled – Islamic Global
-5.5%
9.9%
25.7%
3.2%
33.4%
2.0%
25.9%
-9.7%
Saudi Domiciled – Islamic Global
-3.5%
9.4%
19.3%
6.0%
31.2%
1.5%
25.6%
-10.0%
Source: Bloomberg & Fund Fact sheets
2011
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Islamic Mutual Fund Constraints
• Most are domiciled in closed domestic markets.
• Most carry higher fees than conventional funds.
• Most have difficulty matching or outperforming
industry standard benchmarks.
• Most are retail focused and home country biased.
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Time for Product Diversification
• Diversification from oil price linked countries is a
difficulty as most Islamic funds in the GCC are tied to
local economies.
• Meaning if institutions choose to be Islamic, they are
limited in what's available to invest in.
• Many groups have internal teams or outsource this
work to discretionary mangers in the U.S. & Europe.
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NYSE Listed Index ETFs
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Assets on massive level are flowing into passive, U.S. listed Exchange Traded Funds.
Institutional investors in over 50 counties are using these products to gain broad
market exposure through a highly regulated and liquid investment vehicle.
Example 1: Pension funds in Chile have $16 billion in U.S. listed ETFs.
Example 2: State Street has $135 billion from foreign investors in their U.S. Listed
ETFs.
Falah Capital has shown, creating NYSE Islamic ETFs is now a reality.
A first step towards providing conventionally efficient Islamic funds.
There is nothing stopping Islamic asset management companies doing the same,
regardless of where their headquarters are.
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Thank You
Thom Polson, CEO
Falah Capital, LLC
Seattle, USA
+1 206 633 6668
thom.polson@falah-capital.com
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