Datuk Noripah Kamso, Chief Executive of CIMB-Principal Islamic Asset Management, explained to Isla MacFarlane how the foundations of CIMB-Principal Islamic Asset Management were laid, and how Shari'ah principles will cement them in place
Datuk Noripah Kamso has more than 25 years experience in the Malaysian capital market ranging from corporate lending and investment banking to asset management under the CIMB Group. As previous Chief Executive Officer of CIMB-Principal, she has successfully overseen CIMB-Principal's regional South East Asian expansion into new markets and institutional mandates. She has managed a derivatives broking outfit via CIMB Futures for nine years.
She currently serves as Council Member of the Federation of Malaysian Unit Trust Managers (FMUTM) and as Deputy Chairman of FMUTM's Education Committee. She graduated from Northern Illinois University, Dekalb, USA and obtained her MBA from Marshall University, Huntington, West Virginia, USA.
She is now Chief Executive of CIMB-Principal Islamic Asset Management, and is determined to educate investors on how Shari'ah investing has been proven to grant comparable long term returns despite market volatility, and to focus on increasing the value of Shari'ah innovation.
How was 2009 for CIMB-Principal Islamic?
It was a challenging year for us as 1 July 2008 was when we cut out the Islamic business into a legal entity. The Islamic business previously operated under the CIMB-Principal Asset Management window, but it is now cut out and housed as a legal entity called CIMB-Principal Islamic Asset Management. As such, for the first year till 2009, it was challenging because we were setting a robust foundation for our business to operate on a global basis.
A good foundation is required to ensure that we achieve a global standard. To our knowledge, CIMB-Principal Islamic is the first bank-owned Islamic entity for asset management that is GIPS (Global Investment Performance Standard) compliant. Thus if you are GIPS compliant, you have client reporting based on both global and consultant standards. So to ensure that we are GIPS compliant, we make certain that the investment team is globally trained. This involved a lot of training, from marketing to investment to back room and to consultant expectation.
Why did you feel 2009 was the right time to launch the Islamic business as a legal entity?
As of end 2009, we have possessed some credible track records, particularly a two-year investment track record of outperformance for our Islamic Asia Pacific ex-Japan portfolios against its benchmark. This is a testament to our investors that we are a credible asset manager, and that our Shari'ah investment performance is at par alongside convention investments. Post 2008, many investors were also seeking for alternative investments, hence it was a good time to present them with Shari'ah investment solutions that employs a screening process that serves as an embedded risk management strategy.
How do you think 2010 is going to compare? What are your initiatives for the rest of the year?
Now that our foundations have been set, we are a lot more focussed on Asia and the Gulf Cooperation Council (GCC). The first half of the year will have to be GCC-focussed because by the second half of the year, most people in the GCC will have gone on holiday and there will be a lot less activity compared to the first half of the year. In addition, we will be speaking to the Malaysian International Islamic Financial Centre (MIFC) to provide more support in terms of providing seed capital to be managed by investment managers. Managing this seed capital over a time of at least three years will provide us with the relevant track record to convince international institutional investors to invest in Shari'ah investments.
Is it difficult to set global foundations when regulations in Islamic finance are so fragmented?
We don't see much problem in implementing the global foundations, because the only challenge is to convince institutional investors to invest. There is so much misconception globally on Islamic finance, such as it being for the Muslims only and that those selling Shari'ah products aren't compliant. Such misconceptions are a challenge to Islamic finance and to educate the public on the product will take time and effort. There is actually no difference between selling it in Malaysia or selling it in Europe, but a change in the positioning is required. In Malaysia, Shari'ah is synonymous to mainstream investment products thus investors need less convincing, whereas in Europe you have to make sure that it's quantitative and research-based.
What do you think the main challenges are going to be for 2010?
The challenge for 2010 is education and awareness. It will be about building trust with institutional clients, and this obviously doesn't happen quickly. Trust is built on a track record, so we are now building a credible track record. We are also building the ability to provide continuous research, updates and reviews on the performance of the portfolios on a sustainable basis.
Why did you choose to look at opportunities in Australia? How is the market there?
As part of our global initiative, we did look at opportunities in Australia. In terms of Islamic asset management, we feel that the institutions in Australia are not ready. The retail mass market is interested but it will take quite some time for it to gain momentum. Overall, we are interested in the Australian market, but we didn't think that Australia is right for Islamic asset management just yet.
So where in the world do you think the best opportunities are for Islamic asset management?
In my opinion, the best opportunities lie in Asia and the GCC, where reference to Asia here specifically refers to China, Hong Kong, and the whole of South East Asia.
How do you feel about the recent criticisms in the press that Islamic finance isn't being innovative enough in its products?
Innovation is not limited in Islam. Innovation is contributed by a range of offering of global capabilities namely, global and regional strategies to as complicated a product as an Islamic hedged portfolio. Currently, there are a total of about 600 Islamic investment funds globally with offerings across all asset classes. Islamic finance should not be product-driven but solution-driven.
How can Islamic finance better manage risk without the equivalent of conventional products such as Shari'ah-compliant derivatives?
There are two types of risk management. One is the risk at the product level and the other is the risk of the company itself. Risk at the product level is clearly embedded in the screening process - that is the beauty of Islamic finance. Even if it is a European investor, we can prove to them that Islamic finance can perform consistently, for the simple reason that in a down turning market Islamic finance is more resilient because it is lowly leveraged.
From a Sukuk perspective, there must be an underlying asset to every Sukuk structure, and that itself mitigates the risk of creating a fixed income or Sukuk that is just a derived transaction. Sukuk, interestingly, has got to be used for productive economic activities which are permissible under Shari'ah, e.g. infrastructure, hospitals, schools, telecommunications and energies and it has got to be used for the economic benefit for mankind.
Is there a large enough talent pool of Islamic asset managers?
The industry is not short of expertise. There are investment managers offering Shari'ah portfolios that reside in places as far as Canada, US, Europe - in particular Switzerland - South Africa, and Asia, including Australia. However, there are pockets of concern, case in point, where wealth managers themselves are not convinced of the products, for the simple reason that they look at it as a product-push instead of a solution to provide a holistic, ethical proposal to the client. If it is a product-push, then it is something that they are not properly educated to promote. There is a lot education that needs to be done even at market player level.
There have been criticisms that there aren't enough women in Islamic finance - do you think that this situation is improving?
More women need to be encouraged to enter the industry. Of course, as evident in Malaysia, many women are already holding senior positions. For an example, Tan Sri Dr. Zeti Akhtar Aziz holds the Malaysian Central Bank Governor post, while Tan Sri Zarinah Anwar is the Chairman of the Securities Commission. There are a number of women in executive positions in Shari'ah global asset management houses and banks too. Hence, we can surprisingly conclude that there is already a large contribution of talent from females in Islamic finance.
What are the main challenges the Islamic asset management industry is currently facing?
The biggest challenge is to change the mindsets of investors in understanding that Islamic investments are not just a choice to make investors feel righteous, but rather a sound investment option. In addition, there are other challenges that need to be addressed, which include: product structuring and capital mobilisation; sustainable talent management and sustainable education; credible execution according to Shari'ah principles and sourcing of Shari'ah scholars; Islamic research, screening process and regular cleansing, which include ensuring investments are constantly Shari'ah-compliant; capturing the interest of the younger generation and non-Muslims.
With $1.3 billion in assets under management (as at 30 June 2009), CIMB-Principal Islamic Asset Management is a partnership between Principal Global Investors and CIMB Group. The company is an offshoot of CIMB-Principal Asset Management Berhad, which was founded in 1995 and has a reputable heritage of managing Islamic institutional mandates since 2000.
CIMB-Principal Islamic's objective is to provide Islamic investment solutions, optimally customised to meet institutional global investors' needs and objectives. The firm also manages sub-advised collective investment trust funds. It aspires to be the most valued global Islamic asset management house managing institutional mandates.
CIMB-Principal Islamic focuses on four core capabilities namely, Global Sukuk, Asia Sukuk, Global Equity and AsiaPac (ex-Japan) Equities. As such CIMB-Principal Islamic provides Islamic investment solutions to global institutional investors for eg. Sovereign Wealth Funds, Pension Houses, Takaful companies and central banks and also manages sub-advised collective investment trust funds.
Headquartered in Kuala Lumpur, Malaysia, CIMB-Principal Islamic is strategically located in the world's first country with a complete Islamic financial system operating in parallel to the conventional banking system. This allows the firm to leverage on Malaysia's comprehensive Islamic financial infrastructure and its adopted global regulatory, legal and Shari'ah best practices.
© Islamic Business and Finance 2010
