blogs.wsj.com - Growing appetite for Islamic finance is spurring both large and small Australian financials to boost their offering of Sharia-compliant fixed-income assets, the head of the country’s first Islamic wealth manager said on Thursday.
National Australia Bank Ltd., or NAB, is considering selling up to US$500 million in Islamic bonds in what would be the first issuance of Sharia-compliant debt securities in Australia, two people familiar with the deal told Dow Jones Newswires.
The bonds would be structured to comply with Muslim law by paying a profit from the bond, rather than interest, which is banned in Islam. A spokeswoman for NAB declined to comment. (source)
Issuance of Sharia-compliant bonds, known as sukuk, tumbled in the wake of Dubai’s debt crisis and turmoil in global financial markets. But sales rebounded sharply to a record $32.6 billion in 2011 and issuance so far in 2012 of $10.4 billion is already more than double the same period last year, according to data from Dealogic.
Managing Director of Islamic wealth manager Crescent Wealth, Talal Yassine, said there is “enormous pent-up demand for this kind of product” in Australia in the wake of the global financial crisis, as investors are looking for less risky investments that offer a defined income stream.
“What NAB is seeking to do is enter that market and the likely buyers are Qatar’s [sovereign] wealth fund and Malaysian investors, and maybe from the U.S.,” Mr. Yassine said. “Maybe down the line they might [look to] someone like us but we’re not looking at NAB bonds.”
Islamic banking assets total more than US$1 trillion worldwide while Islamic equity funds comprise around US$50 billion, according to data from Ernst & Young. Crescent estimates the investable universe for Islamic funds in Australia is worth between US$4 billion and US$8 billion, with potential to grow to between US$7 billion and US$13 billion by 2019.
Crescent will launch its own Islamic cash management fund in the next six weeks in partnership with HSBC, in a bid to tap the growing appetite for fixed-interest products in the Muslim community. HSBC will use the money to buy assets, such as commodities, and the profits from that will be used to pay investors in the fund a fixed return of 3.45% a year.
“I’m getting two to three calls a week from organizations asking: ‘Have you launched it yet?’” Mr. Yassine said. “We’re focused on wholesale investors but we’ve also got people in the community looking at it from a retail perspective.”
The product is one of four Sharia-compliant products Crescent will have on offer by the end of 2012, which include its equities fund and Thomson Reuters-backed Islamic index, both launched last year, and its planned superannuation offering, which will be made public later this year. Over the past six months, the equities fund has returned 3.9%, outperforming its benchmark, the ASX 300, by 0.4%.
Mr. Yassine said he expects Crescent’s products to appeal to investors far beyond Australia’s Islamic community. Of the $3.8 billion under management by Crescent’s U.S.-based partner, Saturna Capital, he estimates $9 out of every $10 comes from outside the Muslim community, a ratio he believes can be replicated Down Under.
“It’s about not investing in morally-hazardous businesses, and that’s an idea all Australians can invest in,” Mr. Yassine said.
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Source: http://blogs.wsj.com/dealjournalaustralia/2012/03/29/nab-eyes-islamic-bond-issuance-down-under/ - March 29, 2012
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