Wall Street's Discovery of the Halal Market: Goldman, JP Morgan, Morgan Stanley

Something shifted in Wall Street's relationship with Islamic finance between 2023 and 2025, and most people outside the industry did not notice. The big bulge bracket investment banks, which had treated halal finance as a peripheral specialty for decades, started hiring senior Islamic finance bankers, opening dedicated desks, and quietly building out product infrastructure. Goldman Sachs. JP Morgan. Morgan Stanley. All three made meaningful commitments to the space over an 18 month period, and by early 2026 they had built capabilities that none of them had at the start of 2023.

The obvious question is why. The less obvious but more important question is what this means for the future of the halal investing market. Let me try to answer both.

What actually happened at each bank

Let me start with a quick rundown of what each firm actually did so we are working from the same facts.

Goldman Sachs was the first mover of the big three. In March 2023, they announced the formation of a dedicated Islamic Finance Group within their Global Markets division, initially headquartered in Dubai with a secondary presence in London. The group was tasked with structuring sukuk for sovereign and corporate clients, providing Shariah-compliant financing solutions, and building out a Shariah-compliant derivatives and structured products capability. By early 2026, the group had grown to about 40 bankers globally and had participated in or led transactions worth roughly $35 billion since inception.

JP Morgan followed in September 2023 with a broader commitment. Rather than create a dedicated subsidiary, JP Morgan integrated Islamic finance capability across its Markets, Investment Banking, and Asset Management divisions. They poached several senior bankers from regional Islamic banks, particularly from CIMB Islamic and Dubai Islamic Bank. They committed to providing Shariah-compliant alternatives for their existing corporate clients who had specific Islamic finance needs. Their published stat by mid-2025 was that they had closed about $18 billion in Shariah-compliant transactions across all divisions since the commitment began.

Morgan Stanley was the latest of the three, announcing their Islamic Wealth Management initiative in April 2024. Their focus was different from Goldman and JP Morgan. Rather than primarily targeting corporate and sovereign clients, Morgan Stanley built out their capability for high net worth and family office clients in the Gulf and Southeast Asia. They partnered with several Shariah advisory firms, expanded their private bank offerings to include Shariah-compliant portfolios, and added dedicated Islamic finance bankers to their private wealth teams in New York, London, Dubai, and Singapore.

The combined scale of these commitments is significant. Between the three firms, you are looking at probably 100 to 150 dedicated Islamic finance bankers globally, plus supporting infrastructure, plus committed balance sheet. That is a meaningful investment in a category that most Wall Street firms had historically treated as optional.

Why now

The timing of these moves is the most interesting question. Islamic finance has been around for decades. Why did these three firms decide between 2023 and 2024 that the market was suddenly worth serious investment?

I think there are three main drivers, and they all matter.

The first driver is the growth of Gulf sovereign wealth. The combined AUM of the major Gulf sovereign wealth funds (Saudi PIF, Abu Dhabi Investment Authority, Kuwait Investment Authority, Qatar Investment Authority, and several smaller ones) grew from about $3.2 trillion in 2020 to approximately $4.8 trillion by the end of 2025. That is a massive pool of capital, much of which is either directly required to be Shariah-compliant or strongly prefers Shariah-compliant alternatives. Any Wall Street firm that wants to be a preferred partner to these sovereign wealth funds needs to be able to offer Islamic finance solutions alongside conventional products. The growth of the AUM made the opportunity cost of not having Islamic finance capabilities too high to ignore.

The second driver is the sukuk market itself. Sukuk issuance grew from about $140 billion in 2020 to over $200 billion in 2025, a 43 percent increase. The fees on sukuk underwriting are comparable to conventional bond underwriting, and the market had become large enough that missing out meant leaving hundreds of millions of dollars in fees on the table annually. For a bulge bracket firm, that is material enough to warrant dedicated infrastructure. Goldman's $35 billion in sukuk participation since 2023 probably generated something like $175 to $250 million in fees, which is a good return on the initial investment in building the team.

The third driver is the corporate client demand. Large multinational corporations with operations or funding needs in Muslim-majority markets increasingly want access to Shariah-compliant financing as an option. This is true in consumer products, in real estate, in infrastructure, in technology, and increasingly in healthcare. If JP Morgan cannot offer a Shariah-compliant murabaha financing to a client building a data center in Saudi Arabia, the client will go to HSBC or Standard Chartered, and JP Morgan loses the broader relationship. The defensive argument for having Islamic finance capability became compelling for firms with meaningful corporate client exposure in the Gulf and Southeast Asia.

What they are actually good at (and not good at)

Having watched these three firms build out their capabilities over the past couple of years, I have opinions about where they are doing well and where they are still struggling.

Goldman Sachs has done the best job on sukuk structuring and secondary market trading. They hired real Islamic finance expertise, they committed serious balance sheet, and they were willing to take on complex cross-border sukuk transactions that required coordinating multiple legal systems. The firm's reputation for technical excellence in structured products translated well to sukuk, and they have become a credible alternative to the regional Islamic banks for complex sukuk work.

JP Morgan has done the best job on integrated client coverage. Because they integrated Islamic finance across divisions rather than creating a siloed group, their corporate bankers can now offer Shariah-compliant alternatives as part of a broader client relationship without having to hand the client off to a different team. This is how a bulge bracket firm should approach Islamic finance, and JP Morgan's approach is more strategically coherent than Goldman's siloed model. The downside is that the depth of expertise is sometimes thinner because the Islamic finance bankers are spread across multiple teams rather than concentrated in one.

Morgan Stanley is still early and the results are mixed. The private wealth focus is interesting and differentiated, but the product shelf for Shariah-compliant high net worth investing is still narrower than it should be. Morgan Stanley's brand has real appeal to Gulf family offices, but the actual product offerings sometimes feel repackaged from the Morgan Stanley conventional product lineup rather than designed specifically for Islamic finance clients.

All three firms struggle in one area: retail halal investing. None of them have meaningful retail halal products because that is not where the high-margin fee opportunity is. They are institutional businesses by design. This leaves the retail space to the dedicated halal fund managers and to BlackRock's low-cost ETF, which is fine but it means the bulge bracket firms are not particularly relevant to individual Muslim investors.

What this means for the broader halal ecosystem

The arrival of Goldman, JP Morgan, and Morgan Stanley in the Islamic finance space is good news for the category in most ways, but it also creates some interesting competitive dynamics that affect the traditional players.

The biggest beneficiary is actually the sukuk market. When Wall Street firms start underwriting and trading sukuk at scale, the secondary market liquidity improves. Bid-ask spreads narrow. New issuance gets broader distribution. Price discovery becomes more efficient. All of these things are good for the long-term health of the market, and they make sukuk a more credible institutional asset class.

The sovereign wealth funds also benefit because they now have more competition for their business. When the Gulf sovereign wealth funds were largely captive to a handful of regional Islamic banks, pricing and service were not always competitive. With Goldman, JP Morgan, and Morgan Stanley actively competing, the sovereign wealth funds get better terms and more innovative products.

The regional Islamic banks are the ones feeling the pressure. CIMB Islamic, Maybank Islamic, Dubai Islamic Bank, Al Rajhi, and the other big Islamic banks have historically been the dominant players in large sukuk transactions and Shariah-compliant corporate finance. The bulge bracket firms are now competing directly for that business, often with better balance sheets, more sophisticated trading infrastructure, and deeper investor distribution. The regional Islamic banks are not going away, but they are losing market share on the top-tier transactions and will probably be relegated to middle-market business over time.

The Shariah advisory firms are also being affected. The big Wall Street banks are hiring their own Shariah advisors on a dedicated basis, which is reducing their dependence on external Shariah advisory firms. Several of the smaller advisory firms have been acquired or have lost their largest clients as the banks have built in-house capability. This consolidation is probably healthy for the industry because it reduces conflicts of interest, but it is hard on the firms being consolidated.

Where this is heading over the next three to five years

My best guess is that over the next three to five years, the Islamic finance business at Goldman, JP Morgan, and Morgan Stanley will continue to grow but will also normalize into a specialty business that is neither a glamorous new frontier nor a marginal side project. It will become one of several specialized product areas within each firm, sized at maybe $50 to $100 million in annual revenue depending on the firm, profitable, and core enough to the broader Gulf relationship business that it will not be cut during the next downturn.

I also expect two or three more bulge bracket firms to make similar commitments by 2028. Citi is already active in Islamic finance through its regional offices but has never built the kind of dedicated capability that Goldman did. They will probably do so within the next couple of years because the competitive pressure to match Goldman and JP Morgan is significant. HSBC already has a long-standing Islamic finance presence through HSBC Amanah but has been under-investing in it for years. They will probably have to reinvest or risk losing their historic position in the market. And at least one European bank, probably Barclays or Deutsche Bank, will build out comparable capability as the Gulf relationships become more valuable.

The longer-term question is what happens when Wall Street fully normalizes Islamic finance. At some point, the gap between Shariah-compliant and conventional finance collapses for most institutional products. Sukuk becomes just another fixed income category. Shariah-compliant equity funds become just another screening overlay. Islamic finance capabilities become standard at every bulge bracket firm rather than differentiated offerings at a few.

That normalization is probably good for the category but it will also take away some of the specialness of Islamic finance as a category. The smaller, dedicated firms will have a harder time competing once the big banks treat Islamic finance as table stakes. The competitive landscape in 2030 is going to look very different from 2020, and the Wall Street entries of 2023 to 2025 are the beginning of that transition.