gif Islamic Wealth Management
an Islamic fashion because as long as the players are not engaging in interest, specu- lation and uncertainty, they would be fine”.
However, it could be argued that North Amer- ican Islamic wealth management is over-re- liant on real estate: Mohemmed Athar Khan argues that the real-estate based portfolio should actually be the smallest part of an Is- lamic wealth management portfolio (2010).
The role of sukuk Sukuk is a vital component of Islamic wealth management. As John A. Sandwick tells Global Islamic Finance Magazine, sukuk “is at the heart and centre of the business”. Any healthily balanced portfolio will have an in- strument like sukuk in it. Sandwick explains that “a typical Balanced strategy model port- folio (and actual) allocation in a private cli- ent’s account might have 5% in cash (money market or deposit), 45% in bonds, 35% in eq- uities, and 15% in alternative investments.
“Assuming Muslim private wealth holders to- day have a total of $3 trillion of wealth under management, and assuming 40% of that
Table 1: Annual income in American Muslim households
Annual Income Under $25,000 $25K-$50K $50K-$75K $75K-$100K $100K-$150K $150K-$250K Over $250K
American Muslims
39.8% 49.5% 6.4% 1.0%
% of HH 13% 21% 22% 18% 14% 7% 5%
Table 2: Age of American Muslims Adult Age
18-29 30-49 50-64 65+
Total
Americans 14.1% 31.1% 27.7% 27.2%
Table 3: Codexa/Calyx services
Product Development p
Corporate Finance
Investment Research
Asset Advisory
p
Capital Introduction p
p p
Islamic Conventional p
p p p p
34 Global Islamic Finance October 2010
would go to Islamic wealth management if the owners could be convinced of its legiti- macy, it’s also fair to assume 40% of that amount would be placed in sukuk or sukuk funds”.
With so much wealth management money potentially tied up in sukuk, it is interesting to look at the developments of the nascent sukuk markets in the USA and Canada. The latter nation, in particular, shows signs of having the potential for such a market. The Zawya Collaborative Sukuk Report (2009) explains in some detail the development of the Canadian sukuk market.
According to Omar Kalair, President and CEO of UM Financial Inc and Brian P Koscak, a partner at Cassels Brock & Blackwell LLP, it is only recently that corporate sukuk in the country has begun receiving media atten- tion.
That begun to change however, when, in the summer of last year, a US$380 million Mudaraba Sukuk was proposed by Bear Mountain with Siraj Capital (Dubai) Ltd. as the lead arranger. Bear Mountain is a golf course and residential and commercial de- velopment situated within a 1300 acre de- velopment property located on the outskirts of Victoria, Canada. A proposed 343 acres is to be transferred to a sukuk development.
What does all this mean for the Islamic inves- tor looking for wealth management opportu- nities in Canada? The above-mentioned Bear Mountain sukuk proposal is a great opportu- nity to get involved with a major, multi-facet- ed residential and commercial development usually associated with construction-friendly jurisdictions such as Dubai.
What is the advantage of investing in Can- ada rather than a more traditional Islamic finance jurisdiction such as the emirate? As Islamic finance is still a relatively small and untapped market in Canada, this means there is less investor competition for the best opportunities.
You are therefore more likely to find wealth management opportunities that are actu- ally available than in crowded and saturated markets such as Dubai and Malaysia.
However, there is an amount of uncertainty over whether Bear Mountain is ever actually going to launch the sukuk issuance.
The deal with Siraj Capital was meant to have been closed by the end of 2009, but Siraj missed that deadline due to Siraj’s in- ability to assemble the necessary capital. That said, Bear Mountain is being patient as it waits for Siraj to come through in re- gards to capitalisation. Bear Mountain’s
vice-president of legal and corporate affairs is reported by
Sukuk.me as saying, “We are leaving it in Siraj Capital’s hands. We don’t need additional money”. If completed, The Bear Mountain Sukuk would become Cana- da’s first-ever rated sukuk.
Takaful Another area for investment and wealth management in North America is takaful. As we saw in Figure 1, takaful can be an impor- tant element of Islamic wealth management as it forms part of the wealth preservation stage.
Takaful helps preserve wealth by protecting assets against unforeseen risk and circum- stances. Takaful is risk mitigation through the application of law of large numbers (Bhatty, 2010), the large numbers that the affluent individuals at the heart of wealth management are used to playing with.
What about the players in North America? Is takaful a wealth preservation option for them? Out of Canada and the USA, Canada shows better growth than her neighbour in terms of takaful potential (12% per annum). This is also better than the world average and other major financial markets such as the UK and Japan.
However, in order for takaful to really take root in North America, issues such as pricing strategy, effective publicity campaigns and the creation and continuance of sharia’a creditability.
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