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Reliance Capital to launch Islamic funds in Malaysia

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Points of Essence:

  • Newly licensed foreign fund management company in Malaysia, Reliance Capital will launch Islamic funds within 8 months. Reliance, which is the largest mutual fund in India is expanding overseas. Apart from Malaysia, the company is eyeing setting up operations in the Gulf.

By Nishant Kumar

MUMBAI, Nov 20 (Reuters) – India’s Reliance Capital Ltd will launch Islamic funds in Malaysia in about eight months following an approval it got to set up an asset management company in the southeast country, a top official said.

The move by Reliance, which owns India’s largest mutual fund that had average assets of about $14 billion in October, is part of its plan to expand overseas.

Islamic investing forbids Muslims from receiving interest payments and taking a bet on companies involved in the production or sale of pork, alcohol, tobacco, pornography, gambling and non-Islamically structured finance or life insurance.

Nearly 180 Islamic mutual funds registered for sale in Malaysia and tracked by global fund intelligence firm Lipper managed about $5 billion at the end of October.

Demand for Islamic assets is rising in Malaysia, thanks largely to government efforts to grow the industry. Islamic assets account for 16 percent of Malaysia’s total banking assets, according to official figures.

“We have got the approval to incorporate the AMC business,” Vikrant Gugnani, chief executive of Reliance Capital’s Indian mutual fund unit, told Reuters on Thursday.

Malaysia had earlier handed out Islamic fund management licences to Kuwait Finance House and DBS Asset Management, a subsidiary of Singapore’s DBS Group.

CIMB-Principal Islamic Asset Management, a joint venture between Malaysian lender CIMB Group  and U.S. firm Principal Financial Group has also received approvals.

Malaysia wants to be an Islamic finance hub, specialising in the origination of Islamic bonds, fund and wealth management and international Islamic banking and insurance.

The country has the world’s largest Islamic bond market, with $66 billion or 62.6 percent of global outstanding sukuk, or Islamic bond, issuance as at end-June. However, it faces growing competition from financial centres in the Middle East and Asia as well as from traditional financial centres such as London.

Gugnani had said in June the firm was looking to launch emerging market and Europe-focused funds in the UK by 2009/10 and also to start an asset management business in Singapore in the next two years.

The firm also plans to expand operations to the Gulf countries. (Additional reporting by Y-Sing Liau in KUALA LUMPUR; Editing by Ranjit Gangadharan)

Written by Suapi Shaffaii

November 22, 2008 at 11:51 pm

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