Islamic fund and wealth management is the professional management of Shariah-compliant securities and assets based on Islamic principles to achieve set financial goals.
The scope of activity involves financial analysis, asset and securities selection, investment planning and ongoing monitoring of investment funds. Both individuals and institutions may become Islamic wealth and fund managers through the provision of related services.
The Islamic fund and wealth management first emerged in the 1960s when Muslim investors sought an alternative to the conventional western form of investment, particularly due to interest-dealings in conventional banks (which is prohibited in Islam).
Today, the global Islamic fund and wealth management sector is on the rise, underpinned by strong demand from Muslim and non-Muslim investors. The rising affluence of Muslim communities, who wish to invest surplus funds in a Shariah-compliant manner has been a pivotal factor in the growth of the industry. Another contributing factor is the non-Muslim investors' desire to diversify their investment through Shariah-compliant funds.
Malaysia has achieved some noteworthy milestones in the Islamic fund management industry, beginning with the establishment of two Islamic unit trust funds in 1993. Malaysia also paved the way for several industry "firsts" for the Islamic fund management industry. Notably in 2005, Malaysia launched the first Islamic Real Estate Trusts (REITs) in the world. Equally significant was the introduction of Asia's first Islamic Exchange Traded Fund (ETF).
These achievements were further supported with a mutual recognition agreement between the Securities Commission Malaysia (SC) and the Dubai Financial Services Authority (DFSA) for the cross-border marketing and distribution of Islamic funds between the two Islamic financial markets.
The dynamic progress of Malaysia's Islamic fund and wealth management industry is supported by Malaysia's more than 30 years experience in Islamic finance and the overall comprehensiveness of the well-established Islamic finance industry in Malaysia.This consists of continuous product innovation, a large and diverse pool of Islamic finance talent, a diversity of local and international financial institutions from across the world, a broad range of Islamic financial instruments, a comprehensive financial infrastructure and supportive regulatory, legal and Shariah frameworks. Malaysia offers many attractive value propositions for foreign fund managers to establish their Islamic fund management operation in Malaysia.
The domestic fund managers may also establish their Islamic fund management companies and enjoy various tax incentives and privileges that lead to reduction in the cost of doing business and expedient market entry. For more information on the establishment and application procedure for Islamic fund management company, please contactSecurities Commission.
Foreign financial institutions also have the option of setting up in Labuan International Business and Financial Centre (Labuan IBFC), where the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA) is the governing legislation of mutual funds business and operations in Labuan, supplemented by the Guidelines on Mutual Funds and the Guidelines on Fund Management Companies.
The LIFSSA and guidelines is the regulating framework on the formation of public and private funds in Labuan International Business and Financial Centre (Labuan IBFC). The Shariah compliance requirements are as outlined under the Directive on Islamic Financial Business. A mutual fund can be structured as a company, partnership or unit trust. The incorporation may be done under the Labuan legislations or the laws of any recognised country or jurisdiction. A mutual fund shall include an umbrella fund whose shares are split into a number of different class funds and participants, which are entitled to exchange rights in one part for rights in another.
To provide the above services in the Labuan IBFC, it must be a licensed fund management company from a recognised jurisdiction or an offshore company set by individual fund managers who are licensed by the relevant home supervisory authority. For more information, please contactLabuan IBFC. (MIFC)