Extra pressure applies to asset managers operating within Malaysia, as this jurisdiction is widely seen as a global leader in Islamic finance and investment innovations, noted a top executive at TA Investment Management (TAIM). To stay ahead of the local competition, the firm is ready to explore with external partners like Hamilton Asset Management to develop Shariah versions of the latter’s conventional funds.
“Some of our foreign partners have customized portfolios that they manage for Saudi Arabian clients, and these partners are keen to venture into the Islamic fund space. We can implement some of their strategies in Malaysia,” Assistant Vice-President for Product Development Sammi Lim Shuey Shya told IFN Investor.
TAIM is also testing new ground with local offerings tweaked to provide investors added advantages compared to traditional Islamic funds.
“We are planning to come up with a Shariah version of our conventional multi-asset fund. It won’t be a traditional Islamic asset fund, as we try to draw a differentiation in equity, fixed income and alternative funds such as real estate, private debt and private equity in Malaysia.
“We tapped into Shariah compliant private asset funds, mostly in real estate property. We believe the most promising potentials are other private assets that could be converted into Shariah compliant funds.”
Existing customized fund mandates by TAIM include the Islamic Global Equity Fund, Growth TIF Absolute Return Fund – which Lim said is tilted towards a growth strategy in terms of stock selection and screening.
Another conventional multi-asset fund, which is also a part of TAIM’s Absolute Return series – with a no benchmark constraints strategy – has been seen as successful and Lim said the company is planning to come up with a Shariah version of this fund.
A past innovation that has since been retired is the TA Dana Global fund, which swapped returns against the equity market indices instead of directly investing into stocks. It benchmarked itself against equity returns to the client through the Islamic profit-based swap structure.
“We came up with this fund to minimize forex exposure. By investing directly in equities, you are subject to foreign exchange movements since we deal with global equities and the settlements are in the US dollar instead of ringgit,” shared Sammi.
Describing the past fund’s aim was to give capital downside protection to the client, Sammi said: “We went in through one of the derivative strategies so that the principal gathered for our clients is still in ringgit through local fixed-income holdings. If the index increased by 5%, the fund would also get a 5% exposure.”
At the time the TA Dana Global Fund was launched, US interest rates were very low to cushion the impact of the global pandemic. But when US interest rates rose, the swap differential could not be offset by the local fixed-income investment – resulting in a deficit or loss for the local investor.
“It was not an easy journey with that fund, as we had to get endorsements from our Shariah advisors and local regulators. This is because we had to assure them that the returns that the fund gathered were Shariah compliant,” explained Sammi.
Drawing on past experiences and partnering other experts, TAIM is aiming to create more innovative funds and also considering the embedding of an alternative asset class into its existing Shariah compliant fund to give clients more diversification, said Sammi.
