March 21 Malaysia's i-VCAP Management Sdn Bhd has raised 20 million ringgit ($6.1 million) for its second Islamic exchange-traded fund (ETF), a modest showing compared to its maiden product launched in 2008.
The firm, partly owned by sovereign wealth fund Khazanah Nasional, issued 20 million units this week for the MyETF MSCI Malaysia Islamic Dividend fund.
That is well below the 840 million units issued in January 2008 for the MyETF-DJIM25, the first Islamic ETF in Asia, which now has 255.1 million units in circulation giving it a net asset value of 289 million ringgit.
ETFs are funds which track indexes of shares, bonds or commodities and are traded on stock exchanges. Their sharia-compliant versions follow religious principles such as bans on interest and gambling.
The launch brings the total number of ETFs listed on Bursa Malaysia to six and comes after Malaysia's securities commission introduced a new method to screen stocks for sharia-compliance.
The new methodology incorporates quantitative filters such as benchmarks for financial ratios, moving closer to the approach used in the Gulf as authorities try to internationalise the country's Islamic finance industry.
The new ETF from i-VCAP offers access to a basket of sharia-compliant stocks at a lower cost than through a mutual fund, charging total annual fees of 0.505 percent.
Since ETFs are designed to minimise cost, reaching an optimal size is particularly important, with several Islamic ETFs in the market yet to arrive at such a threshold.
i-Vcap is a subsidiary of Valuecap Sdn Bhd, which is owned equally by Khazanah, Permodalan Nasional Bhd and civil service pension fund Kumpulan Wang Persaraan. ($1 = 3.2965 Malaysian ringgit) (Editing by Eric Meijer)