Launch Partners

Launch Partners

Fixed income instruments: Steady growth in Q1 2024

Key highlights (on a consecutive quarter comparison)

  • Malaysia has the highest number of Islamic fixed income funds.
  • Assets under management (AuM) growth charted in Asia Pacific, Middle East and Americas.
  • New Sukuk-related policies introduced in Oman, Indonesia and Iran.

Overview
Islamic fixed funds’ performance was mixed during Q1 2024, compared with Q4 2023, with the Middle East and the Americas leading growth.

According to the IFN Investor Fund Database, there were a combined total of 263 Islamic fixed income funds worldwide as at the 31st March 2024. Malaysia led with the highest number of funds at 98 (amounting to US$4.11 billion), followed by Pakistan with 46 funds (US$1.25 billion), Indonesia with 38 funds (US$540 million) and Saudi Arabia with 31 funds (US$3.12 billion) (See Chart 1). In Q1 2024, five Islamic fixed income funds were launched to raise a total of US$80 million.

Sukuk issuance for 2024 is expected to be in the range of US$160 billion to US$170 billion. The total volume of Sukuk issuance was recorded at US$179.4 billion in 2022 and fell to US$168.4 billion in 2023 due to tighter banking regulations in Saudi Arabia and a lower fiscal deficit in Indonesia. Africa’s utilization of Sukuk remains constrained as it heavily depends on the conventional debt market to meet its investment needs. This limitation stems from the complexities involved in investments and their associated tax implications.

Chart 1: Islamic fixed income funds breakdown by country

 Source: IFN Investor

AuM growth

Islamic fixed income AuM in the Middle East, Asia Pacific and Americas saw growth within the first three months of 2024. Conversely, Africa and Europe witnessed a decrease in AuM, with declines of -1.12% and -2.05% respectively. The MAMG Global Sukuk Fund by Azimut Investment in Europe fared the worst and dropped in the regional AuM by US$20.5 million in Q1 2024.

  • Middle East: Up by 3.68% to US$4.04 billion from US$3.89 billion
  • Americas: Up by 3.18% to US$805 million from US$780 million
  • Asia Pacific: Up by 0.91% to US$6.69 billion from US$6.63 billion
  • Europe: Down by 1.93% to US$1.53 billion from US$1.56 billion
  • Africa: Down by 1.12% to US$238 million from US$241 million

Table 1: Top performing Islamic fixed income funds by region in Q1 2024

RegionFundFund managerThree-month returns (%)
Asia PacificPak-Qatar Monthly Income PlanPak-Qatar Asset Management20.98
Middle EastAl Saffa Saudi Equity Trading FundSaudi Fransi Capital18.06
Africa27four Shariah Global Flexible Fund27 Four Investment Management10.9
AmericasIman FundAllied Asset Advisors9.79  
EuropeBNP Paribas Islamic Hilal Income FundBNP Paribas Asset Management2.69
Source: IFN Investor

New players and products

As of 2023, 33 fixed income funds were launched across five regions, totaling US$648 million. Pakistan launched 16 new funds (nearly 49% of total funds launched in 2023) amounting to US$204 million, followed by Malaysia (24.2%) with eight fixed income funds at US$365 million.

In Q1 2024, five Islamic fixed income funds were launched reaching a total of US$80 million. The largest was Faysal Asset Management’s Islamic Sovereign Fund at US$41 million, followed by Blackrock with the Sukuk UCITS ETF Fund at US$30 million. NBP Fund Management in Pakistan launched two funds, Islamic Fixed Term Munafa Plan V (US$2.1 million) and Islamic Government Securities Plan III (US$2.2 million). Lastly, MCB Funds in Pakistan launched the Alhamra Wada Plan XII with a total of US$3.69 million.

Kapital DX, a multi-asset fundraising platform in Malaysia, launched its inaugural product offering, a Shariah fixed income product issued by Integra Healthcare Technology worth RM150 million (US$31.55 million). This platform facilitates private companies to raise capital by issuing security tokens allowing ownership in various assets through blockchain and making investment available to a larger audience.

Regulatory development

Oman’s Financial Services Authority introduced a new framework for the bond and Sukuk market. The key aspects of these regulatory changes include the inclusion of green and sustainable bonds and Sukuk, Sukuk Waqf as well as specialized bonds and Sukuk. 

The Indonesian Financial Services Authority also issued new regulations to strengthen the capital market industry through the development of debt securities and Sukuk. The Iranian capital market initiated the introduction of a Shariah compliant crowdfunding framework serving a wide range of products such as fixed income and non-profit contracts. This structure facilitates the implementation of both Murabahah-based contracts and partnership-based contracts. As of 2024, there are over 20 crowdfunding platforms that have been approved by Iran’s Securities and Exchange High Council and are active in the capital market.

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