Key Highlights
- Strong investor interest emerged after US rate cuts
- Islamic mixed asset funds in Europe charted highest AuM growth during Q4 2024
- Saudi Arabia pips Malaysia to be largest manager by AuM
Overview
Islamic mixed asset funds witnessed growth in most regions around the world during Q4 2024, spurred by a cut in US Federal Reserve (Fed) interest rates and stronger economic fundamentals.
From Europe to the Middle East and Asia Pacific, the mixed asset market for Shariah funds signaled strong investor interest, matched by the outperformance of select funds, the IFN Investor Fund Database shows. Saudi Arabia also overtook Malaysia as the largest Shariah mixed assets manager in Q4 2024, after closely trailing the Southeast Asian nation during Q3 2024.
Fund managers’ 2024 multi-asset strategy paid off as they took advantage of a bullish stock market and interest rate movements influencing bond and Sukuk yields to meet their investment objectives and risk profiles.
Global equities may have displayed a lackluster performance in Q4, but the asset class capped 2024 on a strong note (the S&P Global broad Market Index registered a 16.8% return while the S&P 500 gained 25%). For the year, Islamic indexes outperformed their conventional counterparts across the board. Meanwhile moderating interest rates made Sukuk yields more attractive.
Chart 1: Islamic mixed asset funds by region
Performance
Europe’s Shariah mixed asset fund assets under management (AuM) expanded by 28.65% in Q4 2024, topping the world for the asset class.
Table 1: Regional AuM overview at the end of Q4 2024 (quarter on quarter growth)
| Europe | Up by 28.65% from US$987.51 million to US$1.27 billion |
| Middle East | Up by 14.15% from US$3.51 billion to US$4.01 billion |
| Asia Pacific | Up by 9.71% from US$3.94 billion to US$4.32 billion |
| Africa | Down by 8.89% from US$637.08 million to US$580.43 million |
Islamic mixed asset investment schemes, especially with higher yields locked into Sukuk, boomed after the Federal Reserve brought US rates down in three steps by December 2024 to a level last seen in December 2022. For the full year of 2024, fixed income instruments generally reported positive returns.
This dramatic shift in monetary policy will continue to influence fixed income markets.
Chart 2: Islamic mixed asset funds by country
Saudi Arabia’s 25 mixed asset funds had a total of US$3.7 billion AuM at the end of Q4 2024, as the Kingdom edged Malaysia, whose total AuM in mixed assets held by 118 managers stood at US$3.42 billion.
Turkiye had the third largest AuM in this sector, managing US$1.18 billion via 61 funds. The rest of the players all had under US$1 billion each.
It is however worth mentioning that despite South Africa and the UAE managing significantly smaller total AuMs compared to Malaysia and Turkiye, the average size of each Islamic mixed asset funds is considerably larger – US$60 million for the UAE, US$33.53 million for South Africa while in Malaysia it is US$28.98 million and in Turkiye, US$19.34 million.
Table 2: Top performing Islamic mixed asset funds by region at the end of Q4 2024
| Region | Fund name | Fund manager | Three-month returns |
| Asia Pacific | Meezan Asset Allocation Fund | Al Meezan Investment Management | 42.67% |
| Europe | Kuveyt Turk Portfolio Kfz Participation Free Special Fund | Kuveyt Turk Portfoy | 32.95% |
| Americas | SP Funds 2040 Target Date Fund | ShariaPortfolio | 4.66% |
| Africa | 27four Shariah Multi-Managed Balanced Fund | 27 Four Investment Managers | 1.78% |
| Middle East | SAB Invest Multi Assets Defensive Fund | SAB Invest | 0.63% |
Among top performing global mixed asset Islamic funds, the Shariah equities-heavy Al Meezan Investment Management ruled the roost in Q4 2024. The Karachi-based manager posted a three-month return of 42.67% with its Meezan Asset Allocation Fund.
Istanbul bank-based fund manager Kuveyt Turk Portfoy took the second spot, returning 32.95% with its Kuveyt Turk Portfolio Kfz Participation Free Special Fund as the Turkish entity leveraged on a management style that had traditionally delivered above-sector profits to the group.
The SP Funds 2040 Target Date Fund run by Florida-based ShariaPortfolio ranked third. Dominated by US equities and underweight on fixed income, the fund returned 4.66%.
In Q3 2024, the top three performing Islamic funds were all Malaysian, with the Kuala Lumpur-based Maybank and Takaful Dana groups dominating returns.
Outlook
Despite not cutting rates since December 2024 (and it does not seem like the Fed will be cutting it anytime soon), it has nonetheless assured the market that it will reduce rates in 2025. This departure from its previous tightening stance – which typically translates to capital appreciation of bonds and Sukuk due to declining rates – could prove advantageous for longer-term fixed income instruments.
Stocks on the other hand are a mixed bag. Performance so far has been muted on concerns over cross-tariffs action between the US and its key trading partners Canada, Mexico and China.
In the US, the Fed’s challenge will be to reconcile a softening economic outlook with potential policy risks, particularly those stemming from US President Donald Trump’s controversial economic agenda.
The debate is on whether the Islamic space will be an exception to the increasing market tremors seen universally as Q1 2025 draws to a close.
