Rushdi Siddiqui asked Vince Cook whether sovereign wealth funds need to position themselves as white knights in light of the impact of the credit crunch on Morgan Stanley and UBS. The moderator said sovereign wealth funds rescued them on a timely basis but the message from reports did not position them as white knights.

Cook said such funds are looking at small numbers of transactions but that this will increase and they are picking up assets with value where others view it quite differently. Morgan Stanley has been going through some difficult times but will have enormous value in 10 to 20 years.

Abdulkader Thomas said in real estate operations, sovereign wealth funds are real long-term value investors. Sovereign wealth funds which are value investors do their best to buy large assets to avoid the crisis.

One of the sovereign wealth funds, an opportunity fund, which is very active in real estate, has a political activity of buying substantial quantities of US Treasury notes in order to effectively buy insurance policies.

Rushdi sought Mark Smyth’s comments on the recent statement by UAE sovereign funds that they were going to move away from hedge funds as they had not been giving them returns, into index funds. Rushdi then asked if Smyth saw the move as an opportunity for Islamic index funds to go for these high institutions.

Smyth said it could possibly be an opportunity as a number of hedge funds were moving sideways. There are some 400 Islamic compliant equity funds around the world. When you really look at them, perhaps there are some banks here in Malaysia and a handful in GCC that have a retail distribution network. There are a lot of various small funds and they are here to maximize their portfolio and not nurture a new industry,” he explained.

Rushdi then asked Paul Wouters about incentives in Turkey for sovereign wealth funds from Southeast Asia or the GCC and the attractive sector for the funds. According to Wouters, Turkey which is Muslim compliant offers a good environment for investors. Although it is a secular country with legislation based on European law, the general feeling is Muslim and the economy is growing rapidly. He said Turkey offers a lot of investment opportunities in the construction of roads, drains and large projects such as ports and cities.

Rushdi then asked Cook if sovereign wealth funds have shown any interest in Islamic investing. Cook said it is difficult to generalize and very few have a specific strategy in Malaysia with regard to Shariah compliant investment opportunities.

“The reason is partly technical. They are investing outside of their own market for a long-term time horizon. They focus on triple A rating markets and triple A rating regulators. I think their whole thinking takes them away from the domestic market and the much smaller Islamic banking opportunities,” he said.

Rushdi then asked Smyth to comment on Islamic investing in the subprime fiasco where Islamic investing is outperforming conventional investing. According to Smyth, Islamic funds have outperformed the conventional funds in some years.

“In 2007, the Islamic funds outperformed the conventional funds across the board more or less. In 2008, it is expected to be similar. Maybe there is value in Islamic investment, in shares that are less leverage in environments such as where we are today, but that’s not the only criterion,” he said.

Smyth said in terms of Islamic funds, Malaysia lays claim to 136 out of 400 in the world. One must take a macro view whether or not to be bullish on Malaysia.

Rushdi then sought the panel’s view on whether the sovereign wealth fund phenomena will peter out or will be around for a while.

Abdulkader said the funds will be around for a while, and not merely because of high commodity prices, adding that these funds will continue to accelerate. Cook concurred with Abdulkader.

Smyth also said sovereign wealth funds will be around for a long time as they serve the needs of the countries that offer them and he expects the funds to grow.