Franklin Templeton has launched two sharia-compliant equity funds and a sukuk fund in its first foray into Islamic finance for retail investors.The firm says it has no plans to appoint an internal sharia board and has instead contracted Amanie Advisors, an Islamic finance consultancy, to provide the stock and bond screening necessary for the funds to comply with sharia principles.
Franklin Templeton, which already manages $1.1 billion (€840 million) of sharia-compliant assets for institutional clients, says the retail funds will cost the same to run as its conventional products except for the fee it pays to Amanie Advisors. The funds' management fees will be comparable to the firm's conventional funds, it says.
Executive chairman of Templeton Emerging Markets Group, Mark Mobius, who attended a press briefing in Dubai to announce the fund launches, says sharia-compliant funds offer an “enormous” opportunity to reach the world's 1.3 billion Muslims. He says he would be disappointed if the new Franklin Templeton funds did not reach at least several hundred million dollars in size.
Mobius is the lead manager of the Templeton Shariah Asia Growth Fund, an Islamic version of his existing Asian growth fund, while Alan Chua is the manager of the Templeton Shariah Global Equity Fund, also an Islamic version of an existing product.
Mohieddine Kronfol, chief investment officer of Middle East and North Africa fixed income and global sukuk, is manager of the Franklin Templeton Global Sukuk Fund.
Kronfol says strong debt metrics in the Gulf and Malaysia, which together account for the bulk of sukuk issuance, provide support for the sukuk market. Issuance of these bonds, which comply with Islamic principles because they are linked to real assets, has risen sharply in the last two years, though the market is still dominated by sovereigns and government-related entities.
Kronfol praised the partnership with Amanie Advisors as an effective way to offer sharia-compliant funds.
“This model is healthy,” he says. “Islamic jurisprudence is a very broad field. To give sharia the respect it deserves requires people who have the expertise to do it.”
Kronfol admits demand for sukuk still outstrips supply and concedes there is room for improvement on liquidity. However, he says it is significant that his fund is able to offer daily dealing.
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