COVID19: Islamic asset managers show resilience to coronavirus pressures, says Moody’s

Persistently strong demand for Shariah-compliant investments is helping the Islamic asset management sector remain resilient amid the coronavirus-related market upheavals, Moody’s Investors Service said in a new report.

Net inflows into some large Islamic funds in the Gulf Cooperation Council (GCC) countries have remained positive despite weaker markets and lower oil prices, in contrast to the net outflows experience by many western peers.

According to the Moody’s report, the rating agency expects growth in Islamic assets under management to slow to 2% to 4% in this year and next.

“Islamic fund managers in the GCC region benefit from bespoke mandates with a range of affluent clients, including high net worth individuals, family offices, sovereign wealth funds and other government institutions,” said Vanessa Robert, a Vice President and Senior Credit Officer at Moody’s.

“These investors generally have high risk tolerance and long investment horizons,” she said.

Malaysia and Saudi Arabia are the largest Islamic financial service in the world, accounting for almost two thirds of Islamic assets under management between them.

In Saudi Arabia, take-up of Islamic investments is rising rapidly, reflecting growing demand for Shariah complaint products among both corporate and retail investors.

The regulatory environment, characterised by coordination between the Ministry of Finance, the Saudi Arabia Monetary Authority, and the Capital Market Authority, is also supportive.

In Malaysia, innovative Shariah compliant product offerings are helping to drive growth in Islamic assets under management. These include Simpanan Shariah, a Shariah compliant employee provident fund.