Oasis Aims to Build Shariah-Investment Fund Brand

By Mushtak Parker, Arab News

Oasis Group Holdings is the pioneer of Shariah-compliant investment products – both equity and property funds and REITs (real estate investment trusts) – in South Africa since it launched its first Islamic fund in August 1998, the Oasis Crescent Global Equity Fund. But over the last few years, using its product development and stock selection expertise acquired in the local market and armed with better-than-average performances, the group has ventured abroad and now aims to build the first global Shariah-investment fund brand, complete with a global distribution capability and a global asset management capacity. By June 2010, the Oasis family of funds will reach a staggering 63 funds making South Africa the third largest center for Shariah-compliant funds in the world after Saudi Arabia and Malaysia. The flagship Oasis Crescent Global Equity Fund is one of the world’s largest with $125 million assets under management. At end first quarter 2010, the fund achieved a 1-year return of 47.7 percent compared with the Average Shariah-compliant Fund Peer Group of 39 percent and a, annualized return since inception of 7.9 percent compared with the average Peer Group return of minus (-) 0.9 percent. These performances are underpinned by the numerous awards the group has achieved for its manifold funds. For instance, at the Falaika Islamic Finance Awards in April 2010 in Dubai, the Oasis Group won five awards including the “Best Shariah-compliant Global Equity 5-Year Fund” for 2009 for its Oasis Crescent Global Equity Fund. The prime mover behind the Oasis Group’s success and ambitious expansion strategy is Adam Ismail Ebrahim, CEO, Oasis Group Holdings, who has almost two decades of experience in the asset and fund management industry. Here Adam Ebrahim discusses the rationale behind the Oasis strategy and success, and the challenges for the Islamic fund and investment management industry going forward.

Can you update us on the latest developments at the Oasis Group in terms of your Islamic fund offerings?

We have been offering Islamic mutual funds since 1998, and subsequently a range of retail retirement funds and pension-related products. We now have an investment insurance license which allows us to offer Islamic endowments and to take the pre-retirement money and on retirement pay policy holders a monthly pension. This completes our wealth management platform in South Africa.

This is supported by two Islamic balanced funds. We had a medium equity balanced fund for the last eight years and we have now added a high equity balanced fund and a low equity balanced fund. This allows us to lifecycle a risk profile for clients. As such, people up to the age of 50 will go into a high equity balanced fund; those between 50 and 60 would go into a medium equity balanced fund; and in their wealth preservation part of their life when they have stopped working after 60 plus when they need a pension, they would go into a low equity balanced fund.

We also launched the first Shariah-compliant Income Fund in South Africa on April 1, which we project would give competitive yields with 48 hour liquidity with daily pricing. In the first two days after launch the fund has grown to R15 million – we anticipate this fund to reach R100 million within by June 2010, and R250 million by August 2010.

Who are you targeting your fund offerings at?

Everybody, because all our products are across the board from the retail investor saving R1,000 per month, to the high net worth investor, to the pension fund and to the institutional investor. One product fits all. In this way the products are efficient and you get scale.

We were also awarded a license in April to launch Europe’s first Shariah-complaint Income Fund, which is a UCITS III-compliant product domiciled in Dublin. The fund was launched in May and has a high component of sukuk investments in its portfolio. We project the blended income return at this time is likely to be 45 percent, which is a very attractive income return in the current economic climate.

As the sukuk market grows and we get more sovereign issuances, investors will then get exposure to the global sukuk and Murabaha markets with daily pricing and 48 hour liquidity. These are significant product developments in the Islamic investment space. Within the next few months we will also have our range of global balanced funds domiciled in Dublin – high, medium and low equity balanced funds. That will complete our product range in South Africa and globally.

So the global funds are aimed at investors abroad and servicing the offshore investment needs of South Africans?

Yes. The important thing is that we have distribution with global platforms like Citigroup, Goldman Sachs; with regional platforms like AmBank in Malaysia; and local platforms like Emirates Islamic Bank and Abu Dhabi Commercial Bank. We also have distribution tie-ups with insurance and Takaful companies like Salama and Mayban. We believe that the balanced and income range of funds really opens up the Takaful market because this market has been constrained because of the lack of risk profiled investment products in equities with the right regulatory framework and liquidity. We have a number of Takaful and Retakaful companies working with us, so we would anticipate over the next six months significant flows coming into those funds.

What is the difference between the balanced and income funds?

The balanced funds are comprised of property, equity and income investments in differing ratios. The high equity fund will have a higher equity component; the medium equity fund will have a medium equity component; and the low equity fund will have a lower equity component. You can work on the assumption that there will be a 40 percent equity component; 20 percent property component; and up to 40 percent income component comprising Murabaha and Sukuk investments. This is a more stable investment risk profile.

How many funds do you have now in the Oasis family?

We currently have 58 Shariah-compliant funds. When the balanced funds come on stream our total family of funds will increase to 63. I don’t think any other institution would be able to offer a suite of wealth management products in the Shariah space in South Africa and importantly globally as comprehensive as ours.

What are your total assets under management?

We currently have R31 billion ($4.5 billion) under management. We anticipate that over the next five years our assets under management would double or triple. With all these products in place, we are moving from a product development and internal investment phase to an external brand and distribution building, and client expansion phase.

Where are your target markets outside South Africa?

The target is global through various global wealth management platforms; regional through a number of regional wealth management platforms; and institutional. Our aim is to be on the top ten global wealth management platforms over the next two years. We also need to be on 20 regional and on 40 local wealth management platforms. We need market penetration of between 50-70 percent in the Takaful market, and between 50-70 percent in the Retakaful market. We plan to do this either through partnerships or directly.

We have the products. We are now developing a due diligence model with Barclays and Credit Agricole. We already have due diligence approvals with Deutsche Bank, Citigroup and Goldman Sachs. The due diligence process is quite well defined. We need now to turn the due diligence process into successful distribution agreements. We hope the market will see more of the Oasis and the Oasis Crescent brand globally. Starting the beginning of the second half of 2010 we will embark on a lot more brand building through TV and media campaigns, and through sales agents.

Branding and client connectivity is very important. We are going to be a household name in the UK. That is our objective. The UK is a primary market and outside South Africa that is going to be our second home market.

Why do see the UK as an important market for Shariah-compliant products?

There are various reasons. The UK has the same regulatory framework, tax regime, fund distribution models and product profiles as South Africa. It is virtually on the same central time zone as South Africa and is English-speaking. We understand the media profiles that we are working on. We hope to get our funds registered in the UK within the next three months.

What about the GCC markets especially Saudi Arabia with its huge private liquidity?

It is a market we will hopefully reach through our global, regional and local platforms, but it is not a market where we will go directly. We plan to have tie-ups with local Saudi institutions in due course. Our objective is to build the first global Shariah-investment fund brand.

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