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Global Islamic funds’ assets up 7.6 pct in 2010

DUBAI - Assets held by global Islamic funds jumped 7.6 percent in 2010 to $58 billion, reflecting new money inflows and strength in fixed income, commodities and other alternative investments, Ernst & Young said on Monday.

This compares with global Islamic funds’ assets of $53.9 billion in 2009 and $51.4 billion in 2008.

But this rate of growth may be difficult to repeat this year as global uncertainties including the sovereign debt crisis in Europe and the likelihood of a double-dip recession in the United States weigh on asset managers into 2012, according to Ernst & Young’s latest report on the industry, published annually.

“The global economic scenario, investors’ risk aversion and the aftermath of the Arab Spring are the top three risks for Islamic fund managers,” Ashar Nazim, Middle East and North Africa head of Islamic Finance Services at Ernst & Young, said in a statement.

There are 800 global Islamic funds, making up 5.6 percent of the $1 trillion Islamic finance industry. But 70 percent of funds continue to struggle to reach the estimated break-even mark of $100 million, based on average management fees.

Consolidation in the industry continues, with 23 new Islamic funds launched in 2010, offset by 46 liquidated funds. Twenty-three funds were liquidated in 2009.

“The big will get bigger as the going gets tougher to win investors’ trust,” Nazim said.

Funds continue to struggle with a lack of quality sharia-compliant assets and products to invest in as well as an over-dependence on institutional funds, rather than retail funds that could draw affluent consumers.

Retail funds currently make up only 33 percent of global Islamic funds. But liquid wealth among sharia-sensitive investors in the Gulf is expected to add more than $70 billion to Islamic funds by 2013.