Returns on Islamic finance are so good, non-Muslims want in

The growth in demand is moving sukuks from a niche category to a viable alternative investment. This year’s issuance so far has been dominated by Malaysian issuers, with 63% of the market, followed by Saudi Arabia with 13.7%. Malaysian bonds in particular are attracting “agnostic” investors including hedge funds and fixed income managers who don’t necessarily follow sharia. Despite sukuks’ rapid growth, they remain a far from mainstream asset, and one limited mostly to sophisticated investors because of an often complicated structure. They’re also much less liquid than traditional forms of government or corporate bonds, because the secondary market is much smaller. But for investors looking to buy and hold, they’re looking more attractive all the time.