Despite surpassing the $1 trillion mark and being projected to grow to $1.2 trillion by the end of 2025, Sukuk still remains significantly underrepresented in global investment portfolios.
Given its scale and proven resilience, the underrepresentation of Sukuk in global portfolios highlights a structural gap that investors can bridge by incorporating them as core or satellite positions in strategies targeting emerging markets, values-driven mandates, or a vehicle to manage rate exposure.
With investors seeking resilient, income-generating strategies in today’s uncertain rate environment, Sukuk are increasingly positioned to fill key gaps in many fixed-income allocations: Offering diversification, lower volatility, and a strong alignment with ethical principles.
Read: Fitch-rated sukuk surpass $210 billion in H1 2025, rising 16 percent
The global Sukuk landscape
The Sukuk market has evolved into a critical component of global debt capital markets, with USD-denominated Sukuk now representing 26 percent of global Sukuk outstanding. In the GCC, they account for nearly 40 percent of the $1 trillion debt capital market.
Elsewhere, from Malaysia to Türkiye, Sukuk issuance continues to expand, driven by sovereigns, supranationals, and increasingly, corporate and quasi-sovereign entities.
This growing diversity of issuers includes sovereign wealth funds, aircraft lessors, and government-related entities. ESG-linked Sukuk, in particular, are drawing heightened interest, with outstanding volumes rising to $44.5 billion in 2024, a 23 percent increase year-on-year.
This reinforces the notion that Sukuk are no longer just Sharia-compliant alternatives, but rather modern instruments meeting global standards of risk, return, and responsibility.
A GCC-led push for global access
As Sukuk continues to grow in scale and sophistication, a key challenge remains, structured and accessible entry points for global investors to enter the asset class remain limited. Despite the projected growth, as highlighted by Fitch Ratings, the Sukuk market continues to face limited global integration.
To help address this gap, new regionally developed strategies are emerging that translate local expertise into globally relevant formats. One such initiative is the ASB Global Sukuk Fund, which reflects a wider push to make Sukuk more accessible to all investors.
The ASB Global Sukuk Fund addresses two persistent gaps: (1) lack of transparent, scalable access for global investors, and (2) limited regionally anchored vehicles with global compliance standards. Built with Arqaam Capital, it aims to deliver liquidity, oversight, and transparency aligned with institutional requirements.
The macro case for Sukuk
Today’s macroeconomic environment only strengthens the case. A weaker US dollar typically supports emerging market assets particularly in the Middle East and Asia. This dynamic not only boosts the return potential of USD-denominated Sukuk, but also eases funding pressure on issuers, improving both credit quality and issuance appetite.
Importantly, Sukuk have historically demonstrated strong resilience through different economic cycles. In 2018, during a period of aggressive US rate hikes, Sukuk indices still managed to post positive returns. For investors, this illustrates the asset class’s potential to decouple from other fixed income instruments in volatile markets.
Academic studies also support the view that Sukuk offer lower volatility than equities and meaningful diversification benefits. As fixed income portfolios evolve, instruments that combine stability, values-based principles, and geographic diversification deserve more attention.
A regulatory shift that builds confidence
The introduction of AAOIFI Sharia Standard 62 this year marks a new phase in the structural development of Sukuk. Standard 62 marks a pivotal moment by enforcing asset transfers, thereby reducing legal ambiguity and enhancing enforceability – both key considerations for institutional investors navigating Sharia-compliant fixed income
Yes, the regulation introduces new operational requirements, but market players are already adapting through Mudaraba structures and sovereign-led frameworks that ensure smooth adoption. With the right governance and flexibility, these changes have the potential to strengthen the market’s foundations.
Closing the gap
The case for Sukuk is no longer aspirational. It is structural, data-backed, and increasingly urgent. With new issuances expected to reach $200 billion in 2025, the under-allocation to Sukuk in global portfolios is becoming less defensible.
To help close this gap, regionally anchored strategies are emerging that package Sukuk into more accessible, institutionally managed formats. These vehicles reflect a broader effort to integrate Sukuk into mainstream portfolio construction aligning ethical principles with global fixed-income objectives and responding to long-standing investor demand for transparent, risk-adjusted exposure.
The time is now
Sukuk is not a niche alternative. It’s a $ 1.2 trillion market on the cusp of global recognition. For long-term investors seeking income, resilience, rare defaults and alignment with sustainable finance principles, Sukuk represents a timely and essential addition to the portfolio.
The question is no longer why Sukuk but why not now?
Hichem Djouhri is the Senior Executive Officer at ASB Capital. He is a seasoned investment professional with over 18 years of experience in the financial industry. At ASB Capital, Djouhri is responsible for overseeing the firm’s operations and guiding the investment strategies across a diverse range of financial products and services. Djouhri’s expertise spans multi-asset portfolio management, capital markets, asset management, investment banking, financial analysis, and derivatives trading.
