In a report published today, Standard & Poor's Ratings Services said that it believes that the sukuk market has grown large enough to support a transformation in the Islamic fund industry.
The sukuk market returned to growth in the first half of 2010. Global sukuk issuance topped $13.7 billion during this period, nearly twice the $7.1 billion recorded during the same period last year. In our view, the slight improvement in market conditions since the significant slowdown in 2008 has contributed to this performance.
"Sukuk funds are increasingly popular among investors as they produce fixed-income returns similar to those from traditional fixed-income investment products," said Standard & Poor's credit analyst Samira Mensah. "Sukuk funds also help investors to diversify away from pure equity and real estate funds, which suffered heavily during the last credit cycle." Ms. Mensah commented: "The expansion of the sukuk funds industry will, in our opinion, go hand in hand with the growth of the sukuk market, which continues to face obstacles. We believe the success of efforts by governments and other market participants to remove those obstacles will shape the direction the sukuk market and funds industry will take in the future."