Key highlights
- Asia Pacific hosts 412 out of 759 Islamic funds tracked
- The Middle East leads new equity funds growth in 2024
- Growth potential with fund passporting in GCC region
Overview
Shariah compliant equity funds performed well in Q4 2024, capping another banner year for Islamic stock investments – due to major global Shariah indices leading to significant holdings in US-listed tech stocks, that have been on an uptrend since early 2023.
Islamic funds investing in equities outside the US in 2024 have also demonstrated robust performance, particularly within the Asia Pacific region, as the dovish stance of the US Federal Reserve, signaling potential rate cuts, has encouraged investors to seek stronger growth opportunities in emerging markets.
In 2024 alone, the IFN Investor Funds Database recorded 33 new Islamic equities funds launched with a total value of US$2.07 billion in assets under management (AuM). This growth in Islamic funds illustrates the continued appeal of these investments amid evolving global economic fluctuations.
The Middle East led the market, with 15 new funds launched, amassing US$1.87 billion in AuM. There were 14 new Islamic equity funds launched in the Asia Pacific region, with AuM total of US$74.99 million. Europe saw the launch of four new funds, totaling US$124.77 million in AuM.
Chart 1: AuM of Islamic equity funds by region at the end of 2024
Regionally, the Asia Pacific region dominated the Islamic equity fund landscape, hosting the highest number of funds at 412 out of 759, with the largest total AuM value of US$15.67 billion. The Middle East followed closely (see Chart 1) in terms of AuM value, despite having fewer funds (197).
Among individual countries, Saudi Arabia contributed the highest total AuM at US$14.17 billion, followed by Malaysia with US$12.93 billion and the US with US$10.39 billion.
Table 1: Largest Islamic equity funds globally as at the end of Q4 2024
| Fund name | Fund manager | AuM (US$ billion) |
| HSBC UCITS Common Contractual Fund – Islamic Global Equity Index Fund – Class A2CGBP | HSBC Asset Management | 5.56 |
| Amana Growth Institutional Fund | Saturna Capital | 2.91 |
| Amana Growth Investor Fund | Saturna Capital | 2.69 |
| Albilad CSOP MSCI Hong Kong China Equity ETF | Albilad Capital | 1.12 |
| Amana Income Institutional Fund | Saturna Capital | 1.07 |
AuM growth
According to the IFN Investor Funds Database, Islamic equity funds experienced moderate growth in Q4 2024, with total AuM rising by 5.04%, from US$52.97 billion to US$55.64 billion. Growth was observed in most regions, with the Middle East leading the way with a 13.91% increase, followed by the Asia Pacific region. The Americas and Europe posted modest gains, while Africa recorded a slight decline of 0.53%.
- Middle East: Up by 13.91% to US$15.66 billion from US$13.74 billion.
- Asia Pacific: Up by 4.64% to US$15.68 billion from US$14.99 billion.
- Europe: Up by 0.37% to US$11.80 billion from US$11.76 billion.
- Americas: Up by 0.24% to US$10.83 billion from US$10.80 billion.
- Africa: Down by 0.53% to US$1.67 billion from US$1.68 billion.
Table 2: Top performing Islamic equity funds as at the end of Q4 2024
| Region | Fund name | Fund manager | Three-month returns (%) |
| Asia Pacific | Al-Ameen Islamic Energy Fund | UBL Funds | 88.28% |
| Europe | Foneria Portfolio Participation Stock Free Fund (Stock Intensive Fund) | Foneria Portfoy | 73.49% |
| Middle East | SC China Equity Fund – Class R | Sedco Capital | 17.54% |
| Americas | Mackenzie FuturePath Shariah Global Equity Fund | Mackenzie Investments | 8.20% |
| Africa | 27four Best View Shariah Global Equity Fund | 27 Four Investment Managers | 4.97% |
New players and products
New players and products in the Islamic equity fund sector showcased remarkable performance with the launch of 33 new funds in 2024. Table 2 highlights the top five largest new Islamic equity funds launched in 2024, ranked by AuM. The selected funds primarily focus on high-growth opportunities, stable large-cap companies and key sectors such as petrochemicals and foreign exchange.
Table 3: Top five largest new Islamic equity funds by AuM in 2024
| Fund manager | Fund name | Country | AuM (US$ million) |
| Albilad Capital | Albilad CSOP MSCI Hong Kong China Equity ETF | Saudi Arabia | 1,124.94 |
| Al Rajhi Capital | Al Rajhi Large-Cap Fund | Saudi Arabia | 446.47 |
| Al Rajhi Capital | Al Rajhi Petrochemical Fund | Saudi Arabia | 153.16 |
| Ziraat Portfoy | Ziraat Portfolio Ssa Participation Free (Foreign Exchange) Special Fund | Turkiye | 102.75 |
| Derayah Financial | Derayah Opportunistic Saudi Equity Fund | Saudi Arabia | 55.55 |
Regulatory developments
Several key regulatory changes are set to drive developments in the Islamic funds industry. These include:
- Saudi Arabia’s new Investment Law, effective early 2025, enhances market accessibility by streamlining foreign direct investment processes, replacing the Ministry of Investment licensing with a unified national registry for all investors. This provides similar rights to both domestic and foreign investors, building foreign investor confidence.
- Effective early 2025, GCC financial market authorities have adopted a regulatory framework for fund passporting to strengthen integration among the Gulf financial markets by streamlining the processes for distributing, marketing and registering investment funds across member countries. This promotes efficiency and cross-border collaboration in the region’s financial sector.
- The UAE will implement a value-added tax waiver on fund management services and locally established funds, which is expected to lower fund fees and make investment products more affordable. This initiative aims to enhance the competitiveness of the UAE’s asset management industry.
- Europe’s regulatory frameworks are placing a growing emphasis on sustainability, influencing investment strategies. Effective in 2025, the EU Corporate Sustainability Reporting Directive mandates comprehensive sustainability reporting to facilitate better decision making. The European Securities and Markets Authority will enforce stricter usage of ESG related terms in fund names, ensuring at least 80% in qualifying sustainability investments. These measures promote transparency and ethical investment, aligning well with Islamic standards.
- In February 2024, Malaysia’s Securities Commission updated its Guidelines on Islamic Capital Market Products and Services, introducing new provisions for fund management companies on managing clients’ funds and outlining compliance requirements for Shariah advisers.
Outlook
As Shariah compliant funds continue to be drawn to US equities, latest geopolitical developments out of the Americas may spark uncertainties and trade tensions – which could increase global market volatility, particularly in emerging economies.
Other factors to consider include further interest rate cuts that may be triggered by the US Federal Reserve and the impact of resultant fund flows into stock markets outside the US – especially in the Asia Pacific region.
Saudi Arabia will be another factor to consider with new fund offerings that seek to tap into this Arab nation’s major infrastructural targets for its Vision 2030 initiatives. Overall, prospects for Shariah compliant equity funds look positive in the near term.
