Autoriti Monetari Brunei Darussalam Islamic Investment Summit Meeting

Autoriti Monetari Brunei Darussalam Islamic Investment Summit: Meeting New Challenges in Islamic Wealth Management Mohd Radzuan Ahmad Tajuddin Islamic Capital Market 2 August 2017, Brunei Darussalam. Confidential 1

Global Wealth (US$ trillion) Source: BCG Average Annual Changes (%) Confidential 2

Global AUM (US$ trillion from 2008 -2015) Confidential 3

Muslim Wealth: Population and GDP Growth Confidential 4

Number of millionaires in 2015 and 2020 Confidential 5

Global Islamic Funds’ AUM Trend (US$ billion) Confidential 6

Leakages in Islamic wealth management It is estimated about US$9. 5 trillion of global Muslim wealth is intermediated by conventional financial institutions. This is an estimated potential annual revenue of about US$180 billion if these funds are managed by Islamic fund and wealth managers Confidential 7

Challenges within the Islamic wealth management ecosystem Demand Supply Enablers Confidential • Building capability intermediation must offer strong value proposition and solutions • A liberalised policy - diverse offerings across all asset classes • Market-friendly policies and strong supporting infrastructure 8

Nurturing Islamic Wealth Management • Strategic Plan • Strong commitment leadership and • Stakeholder participation Confidential 9

THANK YOU Confidential 10

Wealth Cycle Confidential 11

1 Confidential Malaysia’s Islamic Capital Market: Key Achievements 12

ICM is a key component of the Malaysia’s capital market Bonds Total: RM 1, 173 bil Equity Total: RM 1, 667 bil Shariah Non. Compliant RM 615 bil RM 636 bil Shariah. Compliant RM 1, 031 bil (62%) Total Capital Market RM 2, 840 bil Bonds Sukuk RM 513 Bonds bil Sukuk RM 661 bil RM 512 bil RM 661 bil (56%) ICM RM 1, 692 bil (60%) Confidential * As at 31 December 2016 13

Malaysia’s ICM has grown to RM 1. 7 trillion CAGR 2006 – 2016 : 9. 3% 1, 600 RM billion 1, 200 800 1, 692 62 60 58 56 695 54 % 52 400 50 0 48 2006 2007 2008 2009 Size of the ICM (LHS) 2010 2011 Year 2012 2013 2014 2015 2016 ICM as a percentage of the total capital market (RHS) CAGR = Compounded Annual Growth Rate RM 548 billion CAGR 6. 5% Islamic Equity Sukuk Confidential 2016 2006 RM 146 billion RM 1, 030 billion CAGR 16. 3% RM 661 billion 14

Malaysia continues to lead the global sukuk market Malaysia’s secondary sukuk market stood at USD 183. 8 billion, representing a share of 52. 6% of total sukuk outstanding Confidential 15

Fund management industry is an important segment of Malaysia’s capital market Wholesale Fund Total: RM 91 bil Unit Trust Total: RM 358 bil Total Fund Management RM 696 bil Islamic RM 61 bil Conventional RM 297 bil ETF Total: RM 1. 9 bil lslamic RM 0. 4 bil Conventional RM 1. 5 bil Confidential * As at 31 December 2016 Islamic Fund Management RM 150 bil (21%) Islamic RM 36 bil REIT Total: RM 44 bil Private Retirement Fund Total: RM 1. 5 bil lslamic RM 0. 5 bil Conventional RM 1 bil Conventional RM 55 bil Islamic RM 19 bil VC / PE Total committed funds under management = RM 6. 5 bil Conventional RM 25 bil 16

Domestic Islamic funds industry outpaces global growth 10 foreign 8 local 20 Full-fledged IFMCs 2 JVs Islamic AUM 2016: RM 150 bil CAGR 2009 – 2016: 21. 8% 31 FMCs offering Islamic windows Note: Islamic AUM = Islamic collective investment schemes (CIS) and Islamic private mandates No. of Islamic funds 2016: 328 Islamic funds’ AUM 2016: RM 116. 1 bil CAGR 2009 – 2016: 23% *(CAGR 2009 – 2015 : 24%) Outperformed global Islamic funds’ AUM CAGR of 4. 0% (2009 – 2015)* Note: Islamic funds refer to Islamic CIS which include unit trust funds, wholesale funds, private retirement schemes, exchange traded funds and real estate investment trusts Confidential Sources: Securities Commission Malaysia, Islamic Financial Services Board 17

Accounts for significant share of the global Islamic funds market Second largest AUM by domicile at 28% in 2015 Luxembourg 4% Others 13% United States 7% Saudi Arabia 40% Jersey 8% Malaysia 28% Number of Islamic funds grew at 14% CAGR from 285 in 2004 to 1, 220 in 2015 Source: Islamic Financial Services Board Stability Report 2016 Confidential 18

Moving Malaysia’s ICM forward - navigating through changing global landscape Rising affluence Sustained growth International competitiveness Demand for Islamic solutions Global ICM marketplace Global sustainability agenda Islamic finance in financial centres Digitalisation Confidential 19

The next growth driver for ICM… 2 Confidential Islamic Fund and Wealth Management 20

Supported by global trends… Global AUM (US$ trillion, 2008 -2015) CAGR 7. 5% Confidential Sources: Boston Consulting Group, Pew Research Center, World Bank, Securities Commission Malaysia 21

… and growth in sustainable investment Globally, there are now $22. 89 trillion of assets being professionally managed under responsible investment strategies, an increase of 25% since 2014. Source: Global Sustainable Investment Alliance 2016 SRI market in Asia Others 16% Malaysia 30% China 14% South Korea 14% Confidential Source: Global Sustainable Investment Review 2016 Hong Kong 26% 22

The Blueprint’s Vision Malaysia to be a leading international centre for Islamic fund and wealth management Confidential 23

The guiding principles Seize new market opportunities Strengthen global capabilities of market intermediaries Expand international connectivity IFWM Blueprint: Thrusts and Recommendations Confidential 24

Three strategic thrusts Strengthen Malaysia’s positioning as a global hub for Islamic funds Confidential Establish Malaysia as a regional centre for Shariahcompliant Sustainable and Responsible Investment Develop Malaysia as an international provider of Islamic wealth management services 25

IFWM Blueprint: Thrust 1 Strengthen Malaysia’s positioning as a global hub for Islamic funds Confidential • Leverage on existing strength in Islamic funds • Widen the international base of the industry to develop critical mass by scaling-up operations and offerings • Enhance supply and diversity of Islamic investment instruments 26

IFWM Blueprint: Thrust 2 Establish Malaysia as a regional centre for Shariahcompliant Sustainable and Responsible Investment Confidential • Build upon Malaysia’s position as Asia’s largest SRI market for its Islamic funds • Leverage commonalities in the underlying principles between Islamic investing and SRI • Enhance and strengthen the SRI ecosystem and its entire value chain • Align with the national agenda on sustainability 27

IFWM Blueprint: Thrust 3 Develop Malaysia as an international provider of Islamic wealth management services Confidential • Capitalise on Malaysia’s comprehensive Islamic finance ecosystem to drive development and growth • Develop supporting infrastructure and create a more conducive and enabling environment • Strengthen intermediation capability across the value chain of Islamic wealth management cycle 28

IFWM Blueprint: Recommendations & Key Initiatives 1 2 Provide enabling frameworks to support innovation in Islamic markets • SRI fund framework • To facilitate the offering of alternative assets 3 Enhance market access and international connectivity • Bilateral/Multilateral MRAs • Development of international standards and best practices of Islamic products and services Develop a vibrant ecosystem to accelerate growth of Shariahcompliant SRI • New screening methodology 4 5 6 Promote the growth of private equity Facilitate new digital business models, products and services for Islamic fund and wealth management Advance Malaysia’s positioning as a hub for investment support services • Strengthen private equity/ Venture Capital ecosystem Confidential • Framework for digital investment services • Establish Malaysia as hub for fund administration 29

IFWM Blueprint: Recommendations & Key Initiatives 7 8 Spur institutional participation in Islamic funds • Establishment of development fund Develop facilitative market infrastructure for Islamic wealth management Strengthen intermediation capabilities to support greater internationalisation • Broaden spectrum of sukuk instruments • Enhance vibrancy of the ETF market • Attract presence of international service providers in Malaysia 10 Confidential 9 11 Fortify talent pipeline for Islamic wealth management Provide targeted incentives to strengthen international competitiveness • Global capacity building centre for Islamic capital market • Incentives for development of SRI market 30