Fund Management in Islamic Capital Market

Front

What is the definition of fund management?

Back

The pooling of funds collected from a group of investors with the use of a legal entity, namely a fund, and the person or entity that carries out this investment on their behalf is known as a fund manager or fund management company.

Front

What are the differences between Syariah and Conventional Fund Management?

Back

Front

What are the key principles of Islamic Fund Management?

Back

1. Allah is the owner of wealth and must take good care of the trust.

2. Materiality and validity of transactions promote fair profit.

3. Mutually risk sharing promotes participation in transactions.

4. Value-based investment focuses on social and moral values.

Front

What are the contractual relationship for Islamic funds?

Back

1. Mudharabah (Trustee profit sharing)

2. Wakalah (Agency)

Front

What is Mudharabah in the context of Islamic Fund Management?

Back

Mudharabah is a partnership where the investor allows their investments to be managed by fund managers for an agreed fee.

Front

What is Wakalah in Islamic Fund Management?

Back

Wakalah is an agency relationship where the fund manager acts as an agent for the investor based on a pre-agreed fee.

Front

What are the investment criteria for Islamic fund management companies?

Back

1. 1.   Private equity

   ●     Not Publicly Traded on Stock Exchange

   ●     Comply with Shariah law. structured based on partnership models and the principle of profit-and-loss sharing.

   ●     It is difficult to evaluate the performance lacks a market value.

2. ●     These companies are generally smaller in scale.

4. 2.Listed equity -trade in BM (Main,ACE,LEAP)

3.Islamic Fixed Income Fund Money Market

i- Shariah compliant monet market.

ii- Comparative Risk, Return and Liquidity.

• Longer maturities-higher return-Lower liquidity

• Short maturities- lower return-Higher liquidity

4. 4.Money market

1. i. Islamic banking product (investment account - Mudarabah)

2. ii. Government and semi government issues (GII, MITB, BNMSIjarah,Cagamas, Sanadat)

3. iii. Sukuk (Islamic securities)

Front

What is the role of the Shariah Advisory Council (SAC)?

Back

The SAC vets Shariah-compliant stocks for compliance before they are traded on stock exchanges.

Front

What is the cleansing/purification process in Islamic fund management?

Back

It involves removing non-permissible income from the portfolio, typically by donating it to charity.

Front

What is the threshold for cleansing non-permissible income?

Back

The cleansing process applies when non-permissible income is less than 5% or 20% of the total revenue of a company.