Maria Ceu Cortez, Florinda Silva, Nelson Areal
February 2009
30.10.09
CW: Socially Responsible Investing in the Global Market: The Performance of US and European Funds
Socially Responsible Investing in the Global Market: The Performance of US and European Funds
Maria Ceu Cortez, Florinda Silva, Nelson Areal
February 2009
Maria Ceu Cortez, Florinda Silva, Nelson Areal
February 2009
27.10.09
Opalesque Islamic Finance Intelligence - Fourth Issue
We are back after a month filled with journey (the OIFI team has been travelling of late: Malaysia, Jordan, UK, UAE and more to come) and correspondingly our fourth installment incorporates content from all corners of the globe. We begin by exploring the potential synergies available across the industry (and whether it is in need of a catalyst to spur further growth and collaboration) in our editorial piece.Complementing this is our Featured Resource section which outlines a variety of country and regulatory perspectives on Islamic finance, exhibiting how approaches can differ widely from one country to another. While some of it is positioning, they are testament to the importance being placed on Islamic banking and how regulators are hard at work trying to address and incorporate it into their existing financial architecture.
Nevertheless this is not just a case of mere talk--what is transpiring beyond the boardrooms of IFIs is in fact very energetic discourse that is gradually developing into a tangible initiative. There is great expectation that this can take the shape of an industry-wide effort (resilient to commercial interests) and one which we look forward to reporting in the near future. Indeed we explore the roots of this initiative in our Discussion Board as we borrow the topic from our online forum: 'Does Islamic Finance Need a Voice'.
In this edition OIFI dives deep into multiple asset classes: The Featured Structure section tackles Islamic REITs and the apparent underutilization of liquid real estate products. Khalil Khoury of KIPCO Asset Management Co. provides his perspective on the investable universe of Shariah compliant products in the Allocator Interview section. We further investigate what might be in store for indexation products in our Fund Manager Interview, as we converse with Saeid Hamedanchi of Florentez Investment Management. To round it out, our Industry Snapshot profiles the latest research undertaken on Islamic equity funds, as we hear from the team of Andreas Hoepner, Hussain Rammal and Michael Rezec.
Further expanding on his Lex Islamicus column, Khalil tackles arbitration and enforcement in Islamic contracts - with particular relevance on the revitalized sukuk market. On the other hand, Nikan surveys the various currents of thought on existentialism in Islamic finance under the Opinion Column - with a compendium of views that are not only contrary to the mainstream but possibly test the resolve of Islamic Bankers. But what doesn't kill us makes us stronger.
As always, we welcome your comments & suggestions (you can also feedback directly to the authors), and we remind our registered readers that you have free access to the entire archive of Opalesque Islamic Finance Intelligence (including back issues) and Opalesque Islamic Finance Briefing (our daily news summary), an ever-growing historical data bank of industry news and articles.
Download Opalesque Islamic Finance Intelligence here
20.10.09
New LinkedIn Subgroups
As our Linkedin group has continuously expanded (well over 2,700 members and more than 200 relevant discussions) we have launched smaller subgroups to allow for more focused interaction between like-minded members (we recognize Linkedin requires registration but it is free and very useful in many other respects). We now have four subgroups that cater to the following themes:
17.10.09
Takaful: Concepts & Practise
Thursday 29 October, 2009
Islamic Banking & Finance Network - Hong Kong
Fee & Registration required
(RSVP by 23rd October)
Featured Speaker: Hussain Ahmad, Consulting Actuary, Towers Perrin
Hussain Ahmad, a qualified actuary in the insurance consulting business of Towers Perrin, covers conventional insurance, Takaful, and financial risks for firms across Asia and the U.S. His extensive experience includes conducting M&A due diligence for the general and life insurance sectors, analyses of market entry strategies and start-ups, as well as advising institutional clients on Takaful concepts and their implications on valuation. Prior to Towers Perrin, he worked with Pakistan’s Securities and Exchange Commission on Takaful Rules and other regulations. Hussain is a Fellow of the Casualty Actuarial Society (FCAS) and earned a Master of Finance from Hong Kong University and a B.Sc. from Drake University in the US. He is a regular contributor to industry publications and a noted speaker at leading industry events (and a member of our Linkedin forum).
16.10.09
Islamic finance: a recent history with France, a longstanding history with its banks
This paper from the Reims Management School provides a wide overview of the "breakthroughs, challenges and opportunities" faced by the Islamic finance industry in France. It delves into a historical review and an overview of French institutions already involved in Islamic financial transactions. Most importantly it delves into various current issues such as the Fiscal & Legal adjustments being sought. With thanks to the author for providing the paper.Islamic finance: a recent history with France, a longstanding history with its banks
Ghassen Bouslama, PhD.
Professor of Finance, Reims Management School
July 2009
For our francophone readers: La finance Islamique: une recente histoire avec la France, une longue histoire aves ses banques
14.10.09
Critical Appraisal of Shari'ah Issues on Ownership in Asset-based Sukuk as Implemented in The Islamic Debt Market
Assoc. Prof. Dr. Asyraf Wajdi Dusuki, Head of Research Affairs Department, ISRA & Shabnam Mokhtar, Researcher, ISRA
ISRA Research Paper (No. 8/2010)
"Sukuk comprise one of the fastest-growing segments of the Islamic debt capital market. This paper aims to shed light on Shari‘ah issues that arise in asset-based sukuk structures and operations. It first discusses the concept of sukuk and delineates the difference between asset-based and asset-backed sukuk. It then discusses Shari‘ah issues with regards to ownership (qabd). From the analysis of case studies conducted, three major issues were identified in the operation of asset-based sukuk. They are sukuk-holders’ interest in the underlying assets, restrictions on asset disposal, and due diligence regarding sukuk assets. The paper concludes that restriction of the right of disposal poses a serious doubt whether asset-based sukuk structures truly comply with Shari‘ah principles. Furthermore, the coupling of this restriction of disposal with the purchase undertaking at par effectively turns sukuk into a debt instrument. Hence the paper suggests that there is a need to move towards asset-backed sukuk that clearly fulfils the Shari‘ah requirement. Nonetheless the paper recognizes that the current legal framework impedes the issuance of asset-backed sukuk. Instead of making overnight changes to the sukuk market, the paper highlights the need for all stakeholders to come together and thoroughly discuss measures needed for a transition to an improved market."
12.10.09
Islamic Mutual Funds' Financial Performance and Investment Style
This particular study scrutinizes the performance of Islamic funds with much more comprehensive data of the existing universe of investment products and at the same time delving deeper into the implications of the data. While some of the conclusions would have been voiced within the industry, this study provides much more solid evidence to support/substantiate them.Islamic Mutual Funds' Financial Performance and Investment Style: Evidence from 20 Countries
Andreas G. F. Hoepner (1), Hussain G. Rammal (2) & Michael Rezec (1)
(1) School of Management, University of St. Andrews, UK
(2) International Graduate School of Business, University of South Australia, Australia
September 2009
Abstract: "We contribute to the investment literature by pursuing the first sophisticated, large scale analysis of a strongly growing mutual fund type: Islamic funds. Despite hundreds of Islamic funds exist the few previous studies investigate the financial performance of less than 60 and the investment style of 6 funds. Based on unique data access, we analyse the financial performance and investment style of 262 Islamic equity funds from twenty countries. We develop a (conditional) three level Carhart model to simultaneously control for their exposure to different national, regional and global equity markets and investment styles. Our findings are fourfold. First, Islamic funds from eight (mainly western) nations significantly underperform their international equity market benchmarks, while funds from only three nations do the opposite. Second, Islamic funds generally prefer small stocks but have no preference for other investment styles. Third, Islamic funds from the Gulf Cooperation Council (GCC) or Malaysia neither significantly underperform nor clearly prefer small stocks. These three findings have some theoretical appeal, as Islamic funds’ investment universe is limited to Shari’ah law compliant companies, which are more likely small and present in economies with a higher density of Muslims. Fourth, we find some evidence that Islamic equity funds exhibit a hedging function, as their investment universe is limited to low debt/equity ratio stocks."
With thanks to Andreas Hoepner for providing the paper.
Abstract: "We contribute to the investment literature by pursuing the first sophisticated, large scale analysis of a strongly growing mutual fund type: Islamic funds. Despite hundreds of Islamic funds exist the few previous studies investigate the financial performance of less than 60 and the investment style of 6 funds. Based on unique data access, we analyse the financial performance and investment style of 262 Islamic equity funds from twenty countries. We develop a (conditional) three level Carhart model to simultaneously control for their exposure to different national, regional and global equity markets and investment styles. Our findings are fourfold. First, Islamic funds from eight (mainly western) nations significantly underperform their international equity market benchmarks, while funds from only three nations do the opposite. Second, Islamic funds generally prefer small stocks but have no preference for other investment styles. Third, Islamic funds from the Gulf Cooperation Council (GCC) or Malaysia neither significantly underperform nor clearly prefer small stocks. These three findings have some theoretical appeal, as Islamic funds’ investment universe is limited to Shari’ah law compliant companies, which are more likely small and present in economies with a higher density of Muslims. Fourth, we find some evidence that Islamic equity funds exhibit a hedging function, as their investment universe is limited to low debt/equity ratio stocks."
With thanks to Andreas Hoepner for providing the paper.
10.10.09
CW: Measuring The Performance Of Ethical Mutual Funds: A DEA Approach
Measuring The Performance Of Ethical Mutual Funds: A DEA Approach
Antonella Basso, Stefania Funari
January 2002
Antonella Basso, Stefania Funari
January 2002
Islamic Finance: What leaders do differently
This piece is far more concerned with branding and positioning of Islamic banks in the context of competing side by side with conventional institutions. Not surprisingly items such as product innovation and 'quick' Shariah approval process are prime considerations, among other things. The question remains - does the need to compete vis-a-vis conventional players makes IFIs drift away from their original business model, instruments, and practices??Islamic Finance: What leaders do differently
Lessons learned from Islamic financial institutions in the GCC
Dr. Helmut Schulte-Croonenberg and Alexander von Pock
A. T. Kearney
8.10.09
The Question of an Islamic Futures Market
This short piece is a followup on our previous posting on Islamic futures contracts, in this case we have an argument comparing/contrasting salam with istisna. The author goes on to highlight in the discussion whether there is a "need for a more up-to-date ijtihad to develop an Islamic futures market capable of capturing the merits of modern future markets and avoiding their demerits."
The Question of an Islamic Futures Market
(Apologies, original link is broken!)
Seif I. Tag El-Din
Markfield Institute of Higher Education, Leicester
IIUM Journal of Economics and Management 12, no.1
The Question of an Islamic Futures Market
(Apologies, original link is broken!)
Seif I. Tag El-Din
Markfield Institute of Higher Education, Leicester
IIUM Journal of Economics and Management 12, no.1
6.10.09
Does Islamic Finance Need a Voice?
We have been developing this discussion within our Linkedin forum, and would like to seek feedback and suggestions from everyone in this regard (not just from members of Linkedin but from the industry at large).
Does Islamic Finance Need a Voice?
An industry association?
A lobby group?
A vehicle to aggregate efforts and derive change?
A repository of frustration that nobody listens to?
A pat-in-the-back flag-waving exercise?
Clearly much to discuss - in particular a base agenda - but certainly there is a need for some sort of communication channel with the industry as a whole. Your ideas and comments are welcome.
4.10.09
Do Islamic Banks Have Greater Market Power?
Time and again we hear about how Islamic banking has proven to be on par with conventional banking (whether that is good is another discussion!), here we profile a recent paper that provides a similar conclusion although it uses a far more technical (and substantiated) approach.Laurent Weill
Laboratoire de Recherche en Gestion (LARGE) (Management Research Laboratory)
Université de Strasbourg
February 2009
Abstract: "The aim of this paper is to investigate whether Islamic banks have greater market power than conventional banks. Indeed Islamic banks may benefit from a captive clientele, owing to religious principles, which would be charged greater prices. To measure market power, we compute Lerner indices on a sample of banks from 17 countries in which Islamic and conventional banks coexist over the period 2000-2007. Comparison of Lerner indices shows no significant difference between Islamic banks and conventional banks. When including control variables, regression of Lerner indices even suggests that Islamic banks have a lower market power than conventional banks. A robustness check with the Rosse-Panzar model confirms that Islamic banks are not less competitive than conventional banks. The lower market power of Islamic banks can be explained by their different norms and their different incentives."
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