PETALING JAYA: The local fund management industry is likely to breach the US$300bil mark in assets through the second half of this year and into 2027.
Fitch Ratings said the industry has continued to advance in size, driven by ample domestic liquidity, government initiatives and incentives, ringgit appreciation and wider distribution channels.
It added that the industry has diverse products.
Fitch estimated that total industry assets under management (AUM) reached about 60% of gross domestic product (GDP) at the end of the first quarter of 2026 (1Q26), rising steadily by 9.5% year-on-year (y-o-y) to RM1.1 trillion.
The credit rating agency said this was driven by higher valuations, rising net sales and ringgit appreciation.
“Most AUM was allocated to equities (47.4%), fixed-income securities (22.9%) and money market placements (14.5%).
“Equity market performance was steady, with the FBM KLCI value up around 11% y-o-y at the end of May this year. Government debt yields were also stable,” it noted.
According to Fitch, Malaysia was among the largest Islamic funds globally, while retail investors remained significant contributors to industry assets.
“A firm labour market, rising wages and the progressive wage model should contribute to savings and investments growth, but investor participation is substantial.”
Islamic funds increased to 23.9% of industry AUM at the end of 1Q26, and grown quickly with AUM up 19.5% y-o-y compared with 6.8% for conventional funds.
“In terms of the number of funds offered, Islamic funds accounted for about 40%.
“Syariah-compliant investment products are widely available and diverse, with around 60% of Malaysia’s debt capital market in sukuk format,” the credit rating agency explained.
Unsurprisingly, the industry remains concentrated, evident by the top five fund management companies holding more than half of the industry’s AUM last year.
“Domestic assets held the majority of AUM, while foreign assets were 34% at the end of 1Q26.
“By sources of funds, almost all are domestic, with unit trust funds holding most industry AUM (50.7%), followed by Employees Provident Fund (19.9%) and corporate bodies (11%) in 2025,” Fitch said. Foreign funds were limited, sitting at 2.7% of AUM.
However, Fitch said there was potential to increase foreign participation as investors from abroad made up 43% of Malaysia’s equity trading activity in 2025. Foreign investors also held 21.6% of local government securities in 1Q26.
Meanwhile, Fitch said the government continues to support the industry through a variety of efforts, including, the provision by Securities Commission’s tax exemptions to Islamic funds and Sustainable and Responsible Investment funds up until the year of assessment 2027.
