MUMBAI: India’s Reliance Capital Ltd will launch Islamic funds in Malaysia in about eight months following an approval it got to set up an asset management company (AMC), a top official said.

The move by Reliance, which owns India’s largest mutual fund that had average assets of about US$14 billion (RM50.4 billion) in October, is part of its plan to expand overseas.

Nearly 180 Islamic mutual funds are registered for sale in Malaysia and tracked by global fund intelligence firm Lipper managed about US$5 billion at the end of October.

Demand for Islamic assets is rising in Malaysia, thanks largely to government efforts to grow the industry. Islamic assets account for 16% of Malaysia’s total banking assets, according to official figures.

“We have got the approval to incorporate the AMC business,” Vikrant Gugnani, chief executive of Reliance Capital’s Indian mutual fund unit, told Reuters yesterday.

Malaysia had earlier handed out Islamic fund management licences to Kuwait Finance House and DBS Asset Management, a subsidiary of Singapore’s DBS Group.

CIMB-Principal Islamic Asset Management, a joint venture between CIMB Group and US firm Principal Financial Group, was the earlier recipients.

Malaysia wants to be an Islamic finance hub, specialising in the origination of Islamic bonds, fund and wealth management and international Islamic banking and insurance.

The country has the world’s largest Islamic bond market, with US$66 billion or 62.6% of global outstanding sukuk, or Islamic bond, issuance as at end-June. However, it faces growing competition from financial centres in the Middle East and Asia as well as from traditional financial centres such as London.

Gugnani had said in June the firm was looking to launch emerging market and Europe-focused funds in the UK by 2009/10 and also to start an asset management business in Singapore in the next two years.

The firm also plans to expand operations to the Gulf countries. — Reuters