Saudi Arabia still remains the key market for Islamic investors, representing 42.4 percent of the industry, Kuwait Finance House (KFH) Research showed. Malaysia commands the second spot with over a quarter of the assets while the remaining 34 countries contribute the rest. In terms of average assets per fund, the US comes out the clear winner, having $516.9 million per fund while both Saudi Arabia and South Africa trail behind with only $102.6 million and $95.8 million, respectively. However, only the weighted average returns for each domicile shows that only Malaysia, South Africa, Pakistan and Indonesia from among the top ten jurisdictions by total funds' assets were profitable in 2011. The total assets of global Islamic funds expanded to an estimated $60 billion in 2011 from $58 billion in 2010. Similarly the number of funds increased to 876 funds from 812 in 2010. This represents a lower than expected growth of the funds industry, having been subjected to turmoil in equity markets amid global economic struggles throughout 2011. The direction of investments of Islamic funds during 2011 was targeted towards Saudi Arabia and Malaysia individually, with 27.5 percent and 23.0 percent market share, respectively, while funds managed under a global mandate accounted for 26.6 percent. The vast majority of funds raised in Saudi Arabia and Malaysia are channeled locally. Though these countries make up the bulk of the market, Islamic funds outside of these countries rarely target them for investment. Instead, US equities and assets in the MENA region are popular destinations for investors outside of Saudi Arabia and Malaysia. Funds in western markets tend to be more diversified and tailored for a sophisticated audience with exposure to multiple regions and asset classes. In terms of asset allocation, equities are the main asset class for Shariah-compliant funds worldwide, accounting for almost half of all assets. Malaysia is the largest Islamic equity market for Islamic funds with Saudi Arabia, the US, Ireland and Kuwait being the other major markets. Meanwhile, funds investing in the Islamic money market have increased over the years, which accounted for 23.3 percent of the market at end-2011 as investors sought safety with equity markets remain volatile and uncertainty in the global economy looms. On the currency front, the Saudi riyal and Malaysian ringgit dominate the market given the large number of domestic funds, accounting for 37.7 percent and 25.8 percent, respectively. US dollar funds are increasing and account for 20.3 percent of the total Islamic funds' assets at the end-2011. Though US dollar funds are the most numerous in the market, US dollar funds still trail in terms of average asset size per fund. US dollar funds on average only have $36.2 million in assets as compared to $59.7 million for Malaysian ringgit funds and $139.5 million for Saudi riyal funds.
