Share of Islamic investment funds based in the UK has dropped by almost a third over last 5 years

· Just 2% of funds now have Head Offices within the UK
· 75% are head quartered in the Gulf
· Tax concessions see proportion of funds based in Malaysia soar

Research based on a $25bn sample of Islamic Investment funds from Eurekahedge, the largest independent hedge fund research company.

The research by Trowers & Hamlins shows the proportion of all Islamic investment funds choosing to base their head quarters in the UK has fallen by almost a third over the past 5 years, indicating that the UK cannot be complacent about its ability to attract the Islamic finance industry. The US, where post 9/11 problems over visas have been well publicised, has also seen its share drop from 7% to 5%.

Percentage of all Islamic investment fund assets under management by Head Office Location

Head Office Location 2007/ 2002

GCC 75%/ 76%

UK 2%/ 3%

Malaysia 13%/ 8%

USA 5%/ 7%

Adrian Creed, Partner of Trowers & Hamlins comments: 'The perception is that London is doing very well out of boom in Islamic finance but these figures indicate that this is not the case in every aspect of the market.'

'It is actually the Gulf region and Malaysia that are attracting the vast bulk of Islamic investment funds.'

'London does benefit from Islamic funds outsourcing some of their fund management work to Europe and the US but even this could become less common as the number of talented fund managers willing to locate to the Gulf increases.'

'Bahrain and Dubai are doing a great job of convincing finance professionals, who a few years ago would not have considered living anywhere other than London or New York, that the Gulf can provide exciting and dynamic long term career opportunities.'

'At the same time Gulf-based institutions better positioned to pick and choose from a growing pool of well-trained and competent local talent.'

'More and more US and UK universities are beginning to recognise the advantages of running MBA courses in the Gulf. Cass Business School has just launched an MBA in with a specialist focus on Islamic finance in Dubai and London Business School now runs an MBA based jointly in London and Dubai.'

Proportion of funds based in Malaysia has almost doubled

Adrian Creed says: 'The proportion of Islamic investment funds basing their Head Offices in Malaysia has almost doubled since the Malaysian government announced the introduction of a 10-year tax exemption on management fees for Sharia'h fund managers.'

Trowers & Hamlins explains that the GCC tax regimes also provide Islamic investment funds with a major incentive to base their Head Offices within the Gulf. GCC states are also is still looking at legislative and regulatory reform as another method of retaining and attracting financial institutions.

Adds Adrian Creed: 'These figures suggest that the UK Government cannot afford to be complacent if it wants to increase its share of the Islamic finance industry.'