‘REIT’ Way To Go The end of November was abuzz with activity in the Islamic funds sector with the launch of an increasingly popular asset class in the asset management industry — a first for Singapore and the UAE. The month also greeted the funds industry with a potential US$105 billion of investment opportunities for asset managers globally and several fund launches in two of the most popular asset classes in Malaysia, namely equity and bonds, In the UAE, Dubai Islamic Bank (DIB) and Elffel Management launched the country’s first Shariah compliant real estate investment trust (REIT). Emirates REIT will invest exclusively in high quality, income-producing commercial and residential propertias in the UAE, A key feature of the Emirates REIT is that at least 80% of the company’s net income will be distributed to shareholders annually in the form of dividends, Assets from this newly launched REIT are contributed by DIB, which are underpinned by its long leases. Another feature to benefit investors is the exchange program that will allow investors to trade their assets for shares in the REIT or make cash contributions that will be used for further asset acquisition, ‘The launch of the Emirates REIT is seen as a move by DIB to stimulate the local real estate sector folowing the recent restart of home financing actvi- ties by Tamwoe), a DIB subsiciary. a £ a om pos Z SE e * i a ae < ‘The next Shariah compliant REIT roars from Singapore, where Sabana Real Estate Investment Management launched the Sabana Shariah Compliant REIT which is touted a the first ofits kind to be listed on the Singapore Exchange, as well as the world’s largest listed Shariah compliant REIT by asset value. On the 26" November 2010, Sabana Shariah compliant REIT made its Singapore market dabut at SG$0.99 (USS0.75) and ended the day at $GS1.02 (USS0,77). It raised about SGS6E4.4 million (USS503 millon) in an initial public offering that was oversubscribed by 2.5 times ‘Sabana owns 16 industrial propertios in Singapore with an aggregate floor ooarea of about 8.3 million square feet Distribution is projected at SG$0.082 (US$0.082) per unit in 2011 ana ‘§GS0.083 (USSO.068) in 2012. Sabana intends to acquire properties located near transportation networks from the sale of share proceeds. The REIT has attracted interest from international institutional investors such as Malaysia's largest unit trust ‘company in terms of assets under management (AUM), Public Mutual, Moore Capital Management as well as Al Salam Bank-Bahrain, Capital Investment & Brokerage (Jordan) and FIL Investment Management (an affiliate of Fidelity Investment Managers), one of the largest mutual fund and financial sorvices groups globally. Potential in endowment Islamic endowments made news recently as it was reported that managers of such funds, amounting to about US$105 billion, were looking to diversify their portfolios outside banking deposits To date, about USS40 bilion of endowments (more commonly known as Waqi) have been deposited at commercial banks. But managers are finding it harder to manage these mammoth funds and are expected to move towards the formal financial industry. Ashar Nazim, executive director and head of Islamic financial services for Emnst & Young, Bahrain, said that the Islamic endowments segment has the potential to be a major stimulus for growth in the industry. Wagf comprises cash or assets that largely include land and buildings that are donated by individuals or institutions for charitable and religious purposes. Real estate, mainly prime properties, consist of approximately 80% of Islamic endowments institutions as it had been considered a long term investment: but as product innovation increases within the Islamic finance Istamie Finance -Z.- industry, diversification of asset classes in the portfolio is anticipated. Further, the lack of asset management capabilities of Islamic endowments insilttions provides an opportunity for asset managers. To date, 4 about US$40 billion of endowments have been deposited at The global islamic fund industry's AuM stood at US$52.8 billion or about 5.5% of the total global Islamic finance assets as at the end of 2008. commercial banks Fund launches Banking on China's long term growth, prospects amidst the country’s increasing inflation and rising consumer prices, Aminvestment Bank Group's Amislamie Funds Management has launched its first retail China fund, The Amistamic Great China Fund will invest in Shariah compliant equities with exposure to China, Hong Kong and Taiwan, and is expected to generate double digit returns over the long term. Hamon Invastment Managemont have been appointed as the fund's sub-investment manager. ‘The multicurrency fund (issued in Malaysian ringgit, Singapore dollar and US dollars) is denominated in US dollars and will be invested in China's Acshares, B-shares and H-shares. Greater China markets have reportedly seen returns of up to 99% as opposed to Europe's average of 24%, and the US with only 9% over the last five years. Public Mutual, Malaysia's largest unit trust company in terms of AuM, has initiated an Islamic equity fund and an Islamic bond fund, adding to its existing 26 Shariah compliant funds. The Public Islamic Alpha-40 Growth Fund seeks to investin a maximum 01 40 selected Shariah compliant blue chip stocks, index stocks and growth stocks listed primarily on the Malay- sian stock markets, as well as up to 0% of the net asset value (NAV) in regional markets including Australia, Singapore, South Korea and Taiwan. ‘The Public Islamic Infrastructure Bond will invest up to 98% of its NAV in a portfolio of Sukuk of the companies involved in the infrastructure sector including power plant concessionaires, telecommunication service providers, toll road concessionaires and port operators. >) December 2010/anuary 2011