Oasis Crescent, one of the world’s largest sharia asset managers, has opened an office in London and launched six funds, hoping to attract business from Britain’s estimated 2 million Muslim population.
The South African firm, which manages 2.5 billion pounds in assets, mostly in South Africa, is launching products – such as bond, equity and property funds – which adhere to Islamic principles including a ban on interest.
Achieving scale will be critical, with 70 percent of the 800 Islamic funds globally falling short of $100 million in assets, financial services firm Ernst & Young has estimated.
Also, the size of the industry has only marginally changed in the past two years as fund managers struggle to gain traction and find adequate distribution channels, with returns of minus 3 percent on Islamic funds in 2011 likely to have hit confidence, the UK Islamic Finance Secretariat estimates.
The main competition to Oasis Crescent, which has had an office in Dublin since 2003, will be established British financial services groups that offer some sharia products.
“There is the potential that this could be a 10 billion pound business on a 5-10 year view in the UK,” Adam Ebrahim, founder and chief executive of Oasis Crescent told Reuters.
“This is a real growth story and could turn the UK into a hub for the Islamic space.”
His targets are ambitious in a country which, whilst the largest Islamic finance centre in Europe, is home to less than $1.55 billion out of global sharia fund assets of $58 billion, according to E&Y estimates.
These assets are mostly centred on the Middle East and Malaysia and represent only a fraction of the overall mutual fund industry, at $25 trillion, estimates Investment Company Institute.
Oasis Crescent sees potential for the British market to reach 120-160 billion pounds over 10 years.
“As the market broadens and deepens with more institutions entering the Islamic investment space, this will assist in driving market stimulation,” said Ebrahim. “Market penetration for conventional funds is very high in Britain, there is no reason sharia penetration cannot also be as high.”
Ebrahim said there was a “dormant” pool of money from Muslims in Britain who give away any interest they might earn from conventional bank accounts.
The income fund alone is aiming to grow to 1 billion pounds in three years, buoyed by sovereign sukuks from Qatar, South Africa and Turkey expected to launch later this year which will tap into growing appetite for sharia-compliant assets as traditional investments are battered by the global financial crisis.
“The world is increasingly in need of funding and there is a pool of funders who needs assets. So, there is a natural meeting of ways between demand and supply,” said Ebrahim.
Oasis Crescent’s sharia-compliant global equity fund has posted a return of 122 percent since its launch in 2000 to March 2012, against benchmark returns of minus 11.3 percent.