(MENAFN- The Peninsula) A flurry of foreign money is expected to propel Qatar Exchange (QE) with the launch of its debut Exchange Traded Fund (ETF). Islamic lender Masraf Al Rayan announced it will be launching two debut funds. Of these, the Shariah-compliant Qatari equity ETF, to be listed on the Qatari bourse, is targeting foreign investors.
A sukuk fund will be focused on sukuk in the GCC. Both funds will be managed by Masraf Al Rayan's wholly-owned subsidiary, Al Rayan Investment.
"Globally, ETFs are a $2.5 trillion market and US and European investors are very familiar with them. However the product is relatively new to this region. Foreign investors understand ETFs well and find it to be an attractive means of gaining exposure to a market. It may take a little longer for local retail investors to gain comfort", Akber Khan, Director, Asset Management, Al Rayan Investment, told The Peninsula.
"Given a lack of awareness, it may take some time before we see significant uptake among local investors. An ETF is an index tracking fund that is listed on a stock exchange just like any other stock. So by buying one stock, investors are gaining access to all the stocks in the index that the ETF tracks ", he said.
"ETFs are an important part of our product strategy as currently we offer clients an actively managed mutual fund. We do think having both active and passive products is valuable. It is important to have options for investors." The ETF will track the QE Al Rayan Islamic Index.
On Al Rayan's sukuk fund, Akber said:"There is an enormous under-supply of Shariah-compliant financial products in the market... 20 percent of the world's population is Muslim yet just 2 percent of financial products, globally, are Shariah-compliant."
The balance sheets of Islamic banks are growing rapidly. As wealth across the Muslim world increases, Islamic investors are parking their money in banks. It is only recently that Qatar issued a sovereign sukuk and much of this was snapped up by Qatari and regional Islamic banks in no time. There is material undersupply in sukuk in Qatar and the regionas a whole which will help keep sukuk in strong demand. It is not Muslims alone who buy Islamic financial products; if an opportunity is expected to be lucrative it will be of interest to all investors.
There is a growing appetite for Shariah-compliant products across all sections of investors. "Being Shariah-compliant is not a sales pitch. It essentially enforces a risk management framework for the benefit of all investors. For us, having a strong and consistent performance track record, transparency in terms of investor communication and a well thought out and prudent investment philosophy are our key strengths", he said.
Al Rayan Investment manages the Sharia-compliant Al Rayan GCC Fund which invests in select companies across the GCC based on a 24-month investment horizon. The fund has two classes, 'Q' and 'F'. The Q-Fund is denominated in Qatari Riyal and is open to Qatari individual and institutional investors, while the F-Fund is denominated in US Dollars and is open to all investors, resident in any part of the world.
"Al Rayan GCC Fund has been an excellent performer since it was launched in 2010. Over the past three years, the Standard &Poor's GCC Islamic index rose 13 percent while the GCC fund was up by 60 percent over the same period." After more than 40 percent growth last year, Al Rayan Investment's Assets under Management (AuM) are now in excess of$850m.
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