Islamic Wealth Management gif I
n the previous part of this series,
we went West and looked at the chal- lenges and opportunities for Islamic wealth management in the UK. In this part we will be going even further west and examining the emergence of the industry on the North American con- tinent. Is there really scope for an Is- lamic wealth management sector in the USA and Canada? If so, what types of opportunity are there? What kind of investors would be interested in this geographical market? What develop- ments have there been to date? What is being done to ensure the expansion of the market in the near future?
There is undeniably plenty of potential for the North American Islamic Wealth Manage- ment market to take off, if only based on the number of Muslims on the continent. According to Allied Media Corporation, there are no less than 8 million Muslims in North America-there are 7 million in the USA and 1 million in Canada. Other estimates say that this figure is even greater-perhaps even at 10 million (Ranzini, 2007).
This Muslim population is larger than those of Norway, Finland, Denmark, Switzerland and Sweden. In fact, USA has the largest Muslim population out of all the non-Muslim nations. The American Muslim population is only set to increase, with projections putting it at 16 million by 2014.
So what does this mean for Islamic wealth management in this region? Wealth man- agement tools tend to be used, obviously, by those who are wealthy. Statistics show that North American Muslims are affluent, with the average annual income coming in at US$42,158 per year. Table 1 gives a full breakdown of the income of Muslim house- holds (HH) in North America.
The fact that North American Muslims are able to create such wealth makes them prime potential clients for an expanded Is- lamic wealth management industry on the continent. This is because wealth creation is actually the first stage in the model of an Is- lamic Wealth Management Cycle, as seen in Figure 1. There is a lack of wealth manage- ment tools specifically tailored to the Under 25’s. As Table 2 shows, American Muslims
are younger than Americans in general and therefore the gap in the market regarding these products needs to be filled, from a North American point of view. Overall, about 79% of all Muslims in North America are between the ages of 16 and 65 (Mujahid, 2000).
It thus surely makes market sense to develop more Islamic wealth management products for this young, affluent American-Muslim market: and more products in the American
Figure 1: Islamic Wealth Management Cycle
Wealth Creation: The first stage of the cycle-wealth is created through investment
Wealth Enhance- ment: The wealth is increased via proper gearing and profit- able investment
• Gulf Finance House’s investment in Hailcore, a US ambulance manufac- turer • Arcapita’s interest in the Elysian Devel- opment Group in Chicago, as well as in Church’s Chickens • Unicorn Investment Bank’s acquisition of Gardens Residential Care Centres in California, Ellington Leather Goods, and many more besides
To this day, North America remains as a key driver to the industry. As an investor, it is therefore worthwhile looking into placing your money in funds domiciled in this region in order to help manage your wealth.
The cycle begins again when the
new owners invest the wealth to cre- ate more wealth
Wealth Distribu- tion: The last stage in the
cycle is to pass the wealth onto new owners
Wealth Preserva- tion: Wealth is
preserved through takaful and risk management
You would not be alone in taking this route: Overall investor appetite for diversification is feeding the demand for markets such as Canada. Although this is a good thing in terms of broadening the product spectrum, it also presents the sharia’a-sensitive client with a greater challenge in the context of an investor’s due diligence requirements.
Although finding funds domiciled in North America is becoming increasingly easier, there can be difficulties in analysing manag- ers, from both a quantitative and qualitative perspective.
marketplace means more American-based Islamic wealth management opportunities for all. But is this really how it works out in theory?
Islamic funds Although we may not automatically associ- ate North America with the Islamic fund market, the region was actually shown-as early as 2008-to be an example of a less traditional exposure entering into this par- ticular marketplace, as illustrated in Figure 2 (Eurekahedge).
In terms of asset distribution, North America actually has a slight edge over Europe, as Figure 3 shows, in spite of the presence of major fund centres such as the UK and Lux- embourg in the latter continent.
This relative success is mainly due to the investment of predominantly GCC based Islamic funds in North American industries in a sharia’a-compliant manner (McNamara, 2009). Examples of this include:
What types of Islamic funds are popular in North America? Whilst equity funds con- tinue to be a big hit, money market funds are not so popular in North American offer- ings, where capital markets are not yet vi- able for these types of instruments. In fact, the first Islamic equity fund was founded by the North American Islamic Trust in 1986 (Hayat, 2006). The objective of the fund was to oversee among others the funding of mosques in America.
What is very popular in North America is the sharia’a-compliant real estate product. Lia- quat Ali is an example of a sharia’a-sensitive American-based industry player who is using his years of real estate investment experi- ence to offer a real estate investment model to Americans looking for Islamic wealth man- agement opportunities.
Ali tells Global Islamic Finance Magazine that the demand on this side of Islamic finance is high. “It is easier to engage the investor-side capital [as opposed to the consumer-side] in
2010 October Global Islamic Finance 33
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