6/13/2016Copyright Dr. Remali Yusoff 1 GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 2 Introduction to Islamic Fund Management

6/13/2016Copyright Dr. Remali Yusoff 3 On the completion of this topic, the students should be able to: 1)Define the meaning of Islamic fund 2)Understand the concept of fund generally 3)Understand the scenario of Muslim fund around the world 4)Identify the advantages of Islamic fund 5)Analyses the purpose of Islamic fund Learning Outcomes

6/13/2016Copyright Dr. Remali Yusoff 4 Islamic wealth and fund management is the professional management of Shariah-compliant securities and assets based on Islamic principles to achieve set financial goals. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 5 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. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 6 GE30503 ISLAMIC FUND MANAGEMENT ISLAM IBADAH (RITUAL) GET CLOSER TO ALLAH MANNER OF LIFE

6/13/2016Copyright Dr. Remali Yusoff 7 Islam is a religion that was revealed by Allah SWT since the creation of human being. The purpose of human’s creation is to oblige Allah SWT. This obligation is not limited either by the time or by the place, but it covers all aspects of human life. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 8 Muslims are the second larger group of religions after Christians. These peoples have a lot of wealth to invest. However, there are a few of Islamic counter offered for Muslims.-refer figure from Factbook. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 9 This scenario gives a bad impact to Muslims because Muslims’ daily activities should be within the limit of shari’ah. Otherwise, it will be rejected by the Allah and the doers will be considered as ignorant. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 10 Total of Islamic fund= US$1.3 trilion (RM4.42 trilion) Total of used fund= US$230 bilion (RM782 bilion) /17.7%* More than 75 countries Growth rate: 12-15%/ year *Reference: John Zinkin (CEO of Securities Industry Development Centre), Utusan Malaysia, 5 July GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016 Copyright Dr. Remali Yusoff 11 Globally, the Islamic wealth and fund management industry is estimated to grow to USD1 trillion assets under management based on an aggressive growth rate of 15% annually.* This is equivalent to 6% of total assets managed in a Shariah compliant manner.* *Koziol G, Eurekahedge, Hedge Fund Monthly 'Islamic Fund Industry Overview' 2008 GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016 Copyright Dr. Remali Yusoff 12 Islamic fund management is a solution for Muslim investors. For an Islamic fund, it is prohibited to invest in the companies which involved in the haram activities. These strict rules and regulations made by Islam is purposely to be sure that Muslims operate within the limit of shari’ah. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 13 Islamic fund were the Islamic financial product of the late 1990s. But the first Islamic fund was established during the late 1980s.- what are the catalyst to the development of this fund? GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 14 Islamic Fiqh Academy of the Organization of Islamic Conference (OIC) rulings- shares in a company were defined as being an “undivided portion of the company assets”. But what are consequences of this ruling & what are the main advantages of a fund? GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 15 Consequences= the development of Islamic fund management Main advantages= 1)investors pool their resources with other investors to purchase a wider range of shares than they would be able to acquire as individuals GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 16 2) Reducing their risk 3) The investor also has access to the services of a professional manager GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 17 What is fund- according to “the Accounting and Auditing Organization of Islamic Financial Institutions” (AAOIFI)=investment vehicles, which are financially independent of the institutions that establish them. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 18 Funds take the form of equal participating shares/units, which represent the shareholders/unitholders share of the assets, and entitlement to profits or losses. The funds are managed on the basis of either mudaraba or agency contract. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 19 Another meaning of Islamic fund management-a joint pool wherein the investors contribute their surplus money for the purpose of its investment to earn halal profits in strict conformity with the precepts of Islamic Shari‘ah. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 20 Shariah ruling that governs Islamic fund management= Investment funds are permissible by Shari’a. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 21 Because funds are a form of collective investment that continue throughout their term, the rights and duties of participants are defined and restricted by the common interest, since they relate to third parties rights. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Mohd Zulkifli Muhammad 22 But their validity in terms of Shari‘ah, will always be subject to two basic conditions: 1) Instead of a fixed return tied up with their face value, they must carry a pro-rata profit actually earned by the Fund. Therefore, neither the principal nor a rate of profit (tied up with the principal) can be guaranteed. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 23 The subscribers must enter into the fund with a clear understanding that the return on their subscription is tied up with the actual profit earned or loss suffered by the Fund. If the Fund earns huge profits, the return on their subscription will increase to that proportion. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 24 However, in case the Fund suffers loss, they will have to share it also, unless the loss is caused by the negligence or mismanagement, in which case the management, and not the Fund, will be liable to compensate it. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 25 2) The amounts so pooled together must be invested in a business acceptable to Shari‘ah. It means that not only the channels of investment, but also the terms agreed with them must conform to the Islamic principles. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 26 The subscribers of the Fund may receive a document certifying their subscription and entitling them to the pro-rata profits actually earned by the Fund. These documents may be called 'certificates', 'units'. 'shares' or may be given any other name GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 27 Every investment deals with the risks. In Islamic fund also there are risks = various. Islam accepts risk as its own but rejects any kind of speculations = may bring gharar and maisir. So haram. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 28 As the time changes, Islamic fund becomes a popular investment opportunity. This was proved by the increasing in the number of Islamic counters. The growths of the Islamic counters were occurred in every part of the world. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 29 At last, Islamic fund is an alternative especially for Muslims at large and generally for the whole population. The fund is purposely to enhance the economic status of the ummah. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff 30 -purify and get closer the Muslims to their Creator. -to avoid themselves enrolled in haram’s counter. -a Fardhu Kifayah. GE30503 ISLAMIC FUND MANAGEMENT

6/13/2016Copyright Dr. Remali Yusoff31 Thank you very much for your attention