Government schemes, followed by institutional plans, will be the main drivers of Shariah investments in Southeast Asia.
Stimulated by government initiatives, Malaysia remains a frontrunner in Southeast Asia's Shariah fund market, with $24 billion in Islamic mutual fund assets under management (AUM) for the year ending May 2017.
Malaysia maintains a wide lead over its nearest competitor, Indonesia, which only managed to chalk up $1 billion in Shariah funds for the same period.
Institutional Desire
Global analytics firm Cerulli, in its July 2017 Monthly Product Trends Edition, believes that Malaysia will preserve its pole position in Southeast Asia in terms of Shariah product development and institutional opportunities, while Indonesia will take a longer time to catch up, given the bias toward domestic investments.
Malaysia's lead is largely due to its government's support of expertise in regional and Shariah investments. Together with the Securities Commission (SC), efforts have been put in to broaden the universe of Islamic equities and sukuk (Islamic bonds).
Global Reach
In January 2017, the SC unveiled a five-year Islamic and wealth management blueprint to further enhance the country's value proposition as an international Islamic finance center.
Global firms have also been encouraged to set up Islamic units in Malaysia through tax incentives, and signing mutual recognition agreements with Dubai, Hong Kong, Ireland, and Luxembourg.
Institutional desire to invest in Shariah-compliant investments can be another source of revenue for Shariah fund managers.
Innovation Push
Malaysia is also keen to be the innovation capital for Sharia investments, the country's central bank central bank has been ramping up its embrace of financial technology with new initiatives and regulatory support.
Kuala Lumpur headquartered Farringdon Group recently launched a Robo-adviser service which follows Shariah investment guidelines.
Their new system branded as «Algebra» is aimed at revolutionising the way prospective clients receive advice.
