In operation for barely a year, Malaysian digital asset fund manager Halogen Capital has managed to chalk up over RM60 million (US$12.7 million) of its product sales — largely thanks to it adopting the Shariah credentials route.
Executive Director and Fund Manager Ahmad Fuad Alhabshi told IFN Investor the decision for the firm’s fund to be Shariah compliant was a ‘no-brainer’, given the proactive stance of Malaysian regulators plus the larger pool of Muslims in the local population demographic.
“Once regulatory authority (Securities Commission Malaysia or SC) approved our applications, we could already offer our products to conventional markets. Then we learned that meeting Shariah requirements was quite easy, because the necessary regulations had already been drawn up and gazetted.
“So, instead of just being able to tap mainly non-Muslims, who form around 40% of the potential client base in Malaysia, we could reach 100% of the population demographic. It was worth putting in the extra effort and resources to more than double our client market size.”
Halogen Capital has a full Capital Markets Services license from the SC to manage digital assets — including cryptocurrencies, non-fungible tokens and tokenized assets. Using the unit trust fund structure, Halogen Capital’s current digital asset offerings are the Shariah Bitcoin Fund and Shariah Ethereum Fund.
While Halogen Capital’s fund offerings are mainly via distributor agents to high-net-worth individuals (HNWIs), Ahmad says feedback shows these investors prefer Shariah products when all other factors are equal.
Ahmad pointed out there is an innate bias that extends beyond the Muslim faith, with trust in Shariah compliant financial products extending beyond the ‘no interest’ or ‘asset-backed’ concepts — for many of these investors are seniors who grew up with restricted access to banks.
“Their parents kept cash under mattresses and they have suffered through several economic downturns, so they are not persuaded to fully trust the banking system. With some of this fear addressed by using strict Shariah principles, there is more willingness to place their cash with us.”
Ahmad said many non-Muslims are also putting their money into Shariah (assets) and it would be foolish for Halogen Capital to ignore this potential.
Asked how Shariah compliance addressed investor concerns, Ahmad said the SC mandated clear publication of how risk management was being handled within the firm, plus the listing of all relevant and related risk factors.
Critically, Halogen Capital had to present the impact beyond usual exposures like market fluctuations to outline anything that may become a risk factor. Even the stability of power supply can be a risk, since the fund is focused on digital assets and he said presenting these alerts upfront to investors offers assurance of these issues being watched closely.
Ahmad praised the frequent dialogue sessions conducted by the SC team with the firm as a show of commitment by both parties to progressing the industry further while being alerted early to potential pitfalls.
“This cooperation with the regulatory authority and forward-looking rules form the main reason why Halogen Capital has managed to grow so quickly within Malaysia and we are hopeful of growing our fund sales to RM1 billion (US$210 million) in the next five to 10 years.
Ahmad foresees the firm being able to expand its client base beyond HNWIs via distributor agents to direct institutional clients like insurers, pension funds and banks. Among the hurdles that need to be overcome is the minimum three-year operational requirement for these institutional investors. Ahmad said Malaysia remains the current focus for Halogen Capital, mainly due to the conducive local regulatory environment. “We have got interest from potential partners in Brunei and Indonesia, but we cannot proceed till those jurisdictions have the necessary regulations in place.”
