Investors’ shift into Sukuk, money market funds

A downtrend in global interest rates, spurred by the US Federal Reserve’s triple cuts of 25 basis points each in September, October and December 2025, saw a shift by investors within Indonesia into Shariah money market and Sukuk funds in Q4 2025.

Tracking by the IFN Investor Funds Database showed that anticipation of such rate cuts triggered an early shift by investors, locking in higher returns in Sukuk funds, as seen in Table 1.

The AuM total of US$578.75 million over 40 Sukuk funds at end-2024 began surging a half year later, then doubling to US$1.24 billion by Q3 2025 – to end the year at the same level as the final quarter rate cuts were already factored in.

The capital shift into the 54 Islamic money market funds was more progressive, rising steadily from a total US$821.15 million AuM at end-2024 to US$1.12 billion as at Q4 2025. A similar trend was observed in the 32 fixed income instrument funds, with total AuM up from US$458.9 million in Q4 2024 to US$705.9 million a year later.

In other asset classes, the 76 Shariah equities funds hovered around the US$1.1 billion mark over 2025 before closing the year higher at US$1.39 billion. The 18 mixed asset funds performed similarly, rising to US$184.15 million in Q4 2025 from US$132.25 million in Q3 2025.

Overall, Indonesia’s Shariah funds maintained an upward moment with total AuM over 220 funds at US$4.64 billion at end-2025 compared to US$3.12 billion a year earlier.

Indonesia, the world's largest Muslim-majority country, is pushing aggressively to develop its Islamic finance and investment industry. Lagging behind Malaysia and Pakistan in the Asia Pacific, Indonesia’s nearly 90% of its 280 million population being Muslim poses a vastly undertapped market for Shariah investments.

Table 1: Indonesia’s Shariah funds by asset classes

Source: IFN Investor Funds Database