Optimizing returns has become a real challenge for asset managers in the Islamic investment landscape as the global Sukuk market has evolved, together with the increase of non-traditional issuers and growing issuance sophistication.
To address this issue, BNP Paribas Asset Management has developed a proprietary tool, said Hasif Ahmad Murad, its head of Sukuk and portfolio manager for emerging markets and fixed income points.
“Our dynamic proprietary internal credit research process provides us with a platform to evaluate new, complex issues.”
This tool has guided the development of the BNP Paribas Islamic Fund Hilal Income – which aims to deliver returns over the medium-to-long-term, with lower overall risk, that are above the typical index tracking global US dollar-denominated Sukuk.
“As part of a broader global emerging market debt franchise, it gives this fund a bird’s eye view of the overall market of which Sukuk is a part of, and anticipates new opportunities for the fund that can add to diversification.”
Hasif told IFN Investor that the proprietary tool draws on BNP Paribas Asset Management’s experience of over 15 years in the global Sukuk arena, where it manages around US$1 billion in Sukuk-related assets, mostly for institutional clients.
Explaining this tool, Emerging Markets, Fixed Income Investment Specialist Yu Fu said: “Our proprietary methodology aims to mitigate gaps in rating agency methodologies, allowing us to better evaluate unrated credits and hold conviction in downgraded credits.”
As such, this asset management firm aims to better evaluate how to avoid potential downgrades and defaults, while seeking Sukuk which are mispriced yet possess a higher upside potential.
Moving forward, Hasif said the firm sees equity and Sukuk funds continuing to be key building blocks in asset allocation and anticipates investor demand picking up – especially within the global Sukuk space where returns have turned more attractive.
“Our team believes that global asset managers with multiple capabilities are well placed to cater to the transformation of the Shariah asset class, to better provide specialty solutions to address specific client investment needs.”
