gif Wealth Management

classes in Islamic wealth management. At the International Islamic Finance Fo- rum (IIFF) of that year, high-profile sha- riah scholar Muham- mad Daud Bakar stated, “Investors are always looking for more diversification, be it in real estate, equities, gold and sil- ver. [In the sector] we started off with Sha- ria-compliant stocks, then set up mutual funds, then private equity funds, and we have now moved to the products of ETF which have been launched in Bahrain and Malaysia”.

Islamic ETFs are potentially a crucial part of developing the Islamic wealth management sector. Elsewhere in this is- sue of Global Islamic Finance Magazine, leading Islamic wealth man- agement professional John A. Sandwick tells us, “there is a vast and unmet demand for Islamic wealth and asset management […] what is critically needed is products, products and products, all with good fatwa”.

Common opinion that ETFs could help fill this gap has combined with recent in- creased crude oil revenues to pique companies’ interest in issuing Islamic ETFs (Abu Bakar, 2008).

banks, we have seen the rise of Sukuk, we have seen Western ju- risdictions issuing Su- kuk. So, at this stage, you can’t expect to have the efficiencies of the conventional Western system that have been gained over decades, if not centuries” (Abu Ba- kar).

Despite the relative newness of the Islam- ic ETF market, howev- er, there is empirical evidence to suggest it is fast gaining ground. It is, after all, a mar- ket that allows inves- tors to diversify their exposure to assets, which, as above-men- tioned, is a prime mo- tivation in an Islamic investor’s exploration of alternative asset classes.

The London Stock Exchange currently

100 125 150

25 50 75

05 May

Although crude oil fluctuated noticeably during the global financial crisis, reports from economic hubs such as China this year suggest prices are now rebounding with a vengeance (Duce and Ying, 2010).

The chart above, taken from oil-price.net, shows the historical crude oil price for the past five years. Having dipped dramatically in mid-2008, the commodity is now experi- encing a resurgence that began last year.

There is of course, the concern that Islamic investors will take to ETFs in the long run, but many experts that these investors’ ever- increasing sophistication will prove these

20 GlobalIslamic Finance June 2010

06 May 07 May 08 May

concerns to be unfounded and unjustified. Rushdi Siddiqui, now head of Thomson Reu- ters’ Islamic finance business, indeed says Islamic investors are as equally sophisticat- ed as their conventional counterparts.

It is not that Islamic investors are not in- terested in varied investment vehicles; the issue is actually the relative restriction and lack of product sponsors due to the ETF mar- ket still being in the embryonic stage:

“Islamic finance is 40 years old but in reality, it is only five years old because in the last five years, we have seen the rise of Islamic mega

09 May

has seven shariah-compliant ETFs based on Islamic indi- ces, whilst the DJIM (Dow Jones Islamic Market) Turkey ETF is traded on the Istan- bul Stock Exchange. The Six Swiss Exchange features the EasyETF DJIM Titans 100.

A specific example of a rela- tively popular Islamic ETF segment is that of the gold ETF. Gold’s profile as a long- term Islamic investment op- tion has been on the rise lately. As an asset it is both tangible-making it ideal for Shariah compliant activity- and liquid, meaning it is a

more flexible wealth management tool then, say, real estate.

As well as flexibility, gold is also known for its stability in price, meaning it can act as a reliable cornerstone for any Islamic investor looking to plan the long-term wealth creation and management on their family. The fact that this asset lends itself so readily to Sh- ariah-compliant wealth management means that many Muslims invest in the precious metal, particularly in the GCC region.

Strategies for Private Banks

We have so far looked at Islamic wealth Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80