Mark Mobius, one of the world's most well-known emerging market investors, is getting into Islamic finance, highlighting the sector's growing attraction as a mainstream asset class. Mobius will lead the Templeton Shariah Asian Growth Fund, one of three Shariah-compliant products that is to be launched at the end of this month by investment house Franklin Templeton.
Islamic finance conforms with Shariah law, meaning charging interest on debt and investing in companies dealing in certain products, such as alcohol, gambling and pork, are forbidden. While the initial seed capital of $5 million for his new fund is tiny in comparison to the multi-billion dollar funds he normally manages, Mobius insisted on Monday that the sector's potential meant it should grow significantly in coming years.
"I think (the potential for) sukuk will be enormous and the Asia fund should be hundreds of millions of dollars - I'd be disappointed if we don't get that kind of money," said Mobius, executive chairman of the Templeton Emerging Markets Group. Sukuk are Shariah-compliant bonds which pay a profit rate on the assets behind them rather than a conventional coupon.
Mobius added that when he started covering emerging markets in the 1980s, there were only two firms looking at the area, but there were now hundreds of companies managing billions of dollars of assets. Templeton's Shariah Asian Growth Fund will focus on commodity-related investments, especially oil and petroleum companies, as well as consumer sector firms, including consumer banks, Mobius said.
Franklin Templeton managed $1.1 billion of Shariah-compliant assets globally as of June 30, out of $813.8 billion across its business at the end of 2012. The firm is also launching a Global Sukuk Fund, with $20 million of seed money to invest in Islamic bonds, and a Shariah Global Equity Fund, with $5 million of initial capital.