Launch Of The Establishment Of Cimb-principal Islamic Funds

Assalamualaikum Warahmatullahi Wabarakatuh.

Salam Sejahtera

Bismillahi Rahmani Rahim

Beta bersyukur ke hadrat Ilahi kerana dengan izin dari Nya juga, Beta dapat berangkat untuk menzahirkan titah di majlis pelancaran platform Dana Dublin oleh CIMB-Principal Islamic Asset Management pada hari ini.

  1. It gives me great pleasure to join you on this occasion to celebrate the launch of CIMB-Principal Islamic Funds in Dublin – the first Islamic funds platform in Ireland established by a Malaysian company. Since its establishment in July 2008, CIMB-Principal Islamic Asset Management has taken a leading position in the global Islamic asset management industry.
  2. Malaysia, under the Malaysia International Islamic Financial Centre (MIFC), recognises the significant role fund managers play in growing the Islamic asset management industry. In 2008 the MIFC introduced a series of tax exemptions for a period of up to 10 years, aimed at attracting institutions to establish fund management and Wadiah operations in Malaysia. Since then, it has been very encouraging to see that 16 Islamic fund management houses have been licensed for operation by the Securities Commission.
  3. Today, the total value of global Islamic financial assets, at approximately 1.2 trillion US dollars, constitutes just under 1 percent of global financial assets. There are estimates that suggest it could reach 4 trillion US dollars over the next 8 years. At the end of 2010, the penetration rate of Islamic assets was more than 30 percent in Kuwait and Saudi Arabia; 22 percent in Malaysia and the United Arab Emirates; and 18 percent in Bangladesh. By 2020, the penetration rate is forecasted to be close to or exceed 50 percent in these countries[1].
  4. Islamic asset management, although a very young industry, has become the most dynamic and rapidly evolving component of the Islamic financial services sector today. More and more issuers and investors are flocking to Islamic markets given Islamic finance’s more prudent investment environment and practices. Islamic asset management is expected to continue to undergo rapid growth over the next few years as the demand for Shariah-based investment solutions continues to increase.
  5. Islamic investment instruments have proven to be viable alternatives to conventional instruments and provide competitive risk-return results. A comparison of the performance of Islamic funds against major stock market indices show that Islamic funds have delivered returns with significantly less volatility and better downturn protection[2]. Prudent risk management is inherent in Islamic finance and there is an increasing recognition from Muslim and non-Muslim investors alike of the link between the fundamentals of Shariah-based finance and stable growth. Stocks must pass a rigorous screening process to determine their underlying ability to meet both short and long term obligations. Embedded in this meticulous process is the risk management facet, which entails the selection of stocks that can better withstand macroeconomic turmoil. Coupled with greater transparency, whereby the terms and conditions of investments are clearly defined from the start, the Shariah investment methodology is arguably a step ahead in risk management.
  6. For the growth of Islamic asset management to be sustainable, however, it is necessary for the industry to undergo a significant level of diversification in terms of instruments, markets and portfolio returns. The Islamic investment and capital market space is still considerably dwarfed by the multi-trillion conventional fund industry, and there is tremendous potential for the growth of Shariah-compliant investments. This is particularly so in the areas of project and infrastructure and real estate financing, as well as the many other sectors that contribute directly to the growth of the real economy.
  7. In Malaysia, the government has been leading the way in issuing Islamic investment instruments and it has been very encouraging to see the corporate sector following suit. Malaysia already commands 63 percent of the global sukuk market and research suggests that Malaysia’s foreign issuance of sukuk will increase by between 25 and 30 percent this year.
  8. As mature markets press forward with reforms, new developments and innovation in Islamic finance and fund management, many other markets are starting to actively participate in this arena. The Irish government, for instance, has expressed its intention of turning Dublin into a centre of excellence for Islamic finance. The Irish Central Bank has recently authorised several Islamic finance institutions to operate in Dublin’s International Financial Services Centre. Likewise, the development of Islamic finance regulations in countries such as South Korea, Australia and France, among others, is a welcome development. It will promote further capital flows across borders and further intensify the growth of Islamic finance globally.
  9. The establishment of the CIMB-Principal Islamic Funds on the globally recognised UCITS Funds platform in Ireland will enable CIMB-Principal Islamic Asset Management to optimise the infrastructure and framework set up under the MIFC initiative to support Malaysia in becoming an international hub for Islamic finance. I understand that the UCITS sructure is compatible with Shariah-compliant funds with its focus on investor protection, risk management and asset diversification.

Ladies and Gentlemen:

  1. There are numerous benefits in promoting greater capital flows between countries through the Islamic financial system. Surplus savings can be channelled into investments that will help to create business and jobs in countries where they are needed most, thus generating widespread economic growth. Malaysia’s Capital Market Masterplan 2, prioritises socially-responsible financing and investment, where emphasis is given to nurturing Islamic fund management services with high value-add, such as those that invest based on the principles of active partnership, risk-sharing and social responsibility. The Islamic fund management industry is expected to play a key role in developing products and services that reflect the ethical standards and value propositions of Islamic finance.
  2. The industry needs players who are able to bridge divides and build cross border connectivity. I am certain that the establishment of the CIMB-Principal Islamic funds platform in Ireland will contribute towards this end and it is my hope that it will achieve much success over the coming years.
  3. Congratulations and I wish you the very best.

Wabillahi taufik walhidayah.

Wassalamualaikum warahmatullahi wabarakatuh.

  1. “Broader Product Range to Lift Demand” in The Asset Magazine, November 2011 Issue.
  2. “2011 Key Trends in Islamic Funds” in Islamic Finance News Supplements, September 2011 Issue.
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