While the Islamic investments arena within the UK has grown tremendously in recent years, there remains a major stumbling block in the form of high fees for both initial entries and repeat transactions.
UK-based TAM Asset Management Portfolio Manager Francis Banzon shared with IFN Investor that fees being charged for Shariah compliant investments are still expensive relative to those imposed at traditionally-managed funds.
“This is, of course, expected due to the added economics of having to remunerate Shariah boards, additional screening requirements and the current lack of scale in funds. However, we expect increasing awareness and demand for such funds to help drive fees lower.”
Francis noted there is now more pressure for lower fees with the advent of Islamic fintech solutions using apps. To continue attracting higher volumes of retail investors, expectations are for transaction costs to be absorbed rather than passed on to clients.
Another aspect that is driving interest in Shariah assets is how more of such global equity and fixed income funds are becoming available. Limited offers previously led to concentrated portfolios that lacked the ability to potentiate sources of alpha. “Some attractive opportunities were only present to those without religious constraints.”
Citing recent examples of HSBC with its suite of Islamic screened index funds, Schroders running an Islamic systematic factor-based strategy and Principal Asset Management’s multi-asset strategy, Francis said these developments are “helping supplement our ability to construct more sophisticated portfolios and pass the benefits on to our clients”.
As such, Islamic investors now have the option to invest in fully diversified portfolios with comparable levels of agility to navigate through all economic cycles as a traditionally-managed portfolio would.
Seeing opportunities beyond the traditional Islamic investments in illiquid real estate assets or vanilla equity and fixed income strategies, Francis said the landscape is getting brighter for Islamic investors, with more solutions expected to be available soon to support their wealth management goals.
