Takaful Investment Portfolios: A Study of the Composition of Takaful Funds in the GCC and Malaysia

Chapter 6

Locating the Differences Between Actual and Desired Investment Portfolios

After presenting the actual portfolio composition of takaful operating companies in both the GCC and Malaysia during the period from 2002 to 2005 in Chapter 5, this chapter aims to explore whether the actual portfolio composition is really the targeted portfolio composition that takaful operating companies desire to have whereby the divergence between the actual and desired investment portfolio, if any, can be identified.

As the takaful industry is still evolving, the identification of the desired portfolio composition is very crucial for several reasons. The first reason is the need to ascertain whether the actual portfolio composition structure is influenced by the companies’ desires or by market forces. In particular, some of the products required by the takaful operating companies might not be available in the market and this could lead the companies to choose the current portfolio composition.

The understanding of the gap between actual and desired compositions will help identify the products required by the takaful operating companies and fill that gap, allowing this industry to grow normally. Another factor making the study of this gap very important is the integration between the takaful industry and the Islamic banking industry. The Islamic banks would realise the opportunity to focus on this industry and particularly the asset management of takaful operating companies’ investment portfolio. ...