Piles of miserable cash
Sometimes sitting on a pile of cash can be pure misery.
That was a central gripe of Islamic bankers at the London Sukuk Conference, held in the Abu Dhabi-owned Jumeirah Carlton in upmarket Belgravia.
What happens when you combine a shortage of Sharia-compliant high quality liquid assets, and regulatory insistence that banks hold enough cash to keep them solvent for 30 days of continuous outflows?
Miserable bankers sitting on piles of useless cash.
Regulators demand Islamic banks hold more liquid assets. But bankers grumbled that they had done little to make markets in these assets.
A clarion call to sovereigns everywhere, from Islamic bankers: bring us your high-grade sukuk, and we will buy them gladly.
An issue or two in London
Mutterings, then, that South Africa and the UK are mulling follow-up issuances to their 2014 debuts, caused ears to prickle.
Unnamed South African treasury officials have muttered gentle promises into the ears of a reporter or two, it appears.
“I cannot speak for Her Majesty’s Government,” said Jeremy Fern, head of City Affairs at the City of London Corporation, the local government of the Square Mile, with a glimmer in his eye. “But the ten times oversubscription of London’s debut sukuk must say something and something significant.”
Islamic bankers are frustrated with the UK’s visa regime, however. The Conservative party, re-elected in May, has promised to cut net migration from outside of Europe. And that means even highly-skilled bankers from Organisation of Islamic States members are having difficulty entering the country.
If London shrugs, its rivals will come knocking.
Islamic finance’s unlikely convert
To Russia, where Islamic finance has won an unlikely convert: The Eastern Orthodox Church.
Orthodox Archpriest Vsevolod Chaplin told a conference of the many theological congruences between Sharia and Eastern Christianity, especially in ethical finance.
But Herman Gref, chief executive of Sberbank, Russia’s biggest bank, might have given the geopolitical game away.
“We will actively promote the development of such a tool as Islamic banking, as it opens up a good opportunity to work with international partners amid sanctions,” he was reported by state news agency Russia Today as saying.
Interesting systems in Kuwait
Apparently, even Sharia is not immune from Disruption, that Schumpeterian force much beloved of Silicon Valley executives.
What Uber has done for the roads of London, Kuwaiti telecommunications company Path Solutions promises to do for Islamic investment banks, with its “Sharia-compliant IT systems”.
How exactly, you may wonder, as you thumb rapidly through the Hadith in search of guidance, does one make an IT system Sharia-compliant?
“It doesn’t have the word ‘interest’ anywhere in it,” says Mohammed Kateeb, the company’s chief executive.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
How Apple's credit card works
The Apple Card looks different from a traditional credit card — there's no number on the front and the users' name is etched in metal. The card expands the company's digital Apple Pay services, marrying the physical card to a virtual one and integrating both with the iPhone. Its attributes include quick sign-up, elimination of most fees, strong security protections and cash back.
What does it cost?
Apple says there are no fees associated with the card. That means no late fee, no annual fee, no international fee and no over-the-limit fees. It also said it aims to have among the lowest interest rates in the industry. Users must have an iPhone to use the card, which comes at a cost. But they will earn cash back on their purchases — 3 per cent on Apple purchases, 2 per cent on those with the virtual card and 1 per cent with the physical card. Apple says it is the only card to provide those rewards in real time, so that cash earned can be used immediately.
What will the interest rate be?
The card doesn't come out until summer but Apple has said that as of March, the variable annual percentage rate on the card could be anywhere from 13.24 per cent to 24.24 per cent based on creditworthiness. That's in line with the rest of the market, according to analysts
What about security?
The physical card has no numbers so purchases are made with the embedded chip and the digital version lives in your Apple Wallet on your phone, where it's protected by fingerprints or facial recognition. That means that even if someone steals your phone, they won't be able to use the card to buy things.
Is it easy to use?
Apple says users will be able to sign up for the card in the Wallet app on their iPhone and begin using it almost immediately. It also tracks spending on the phone in a more user-friendly format, eliminating some of the gibberish that fills a traditional credit card statement. Plus it includes some budgeting tools, such as tracking spending and providing estimates of how much interest could be charged on a purchase to help people make an informed decision.
* Associated Press
