The most efficient and legally robust way to set up Islamic funds has been set out in a report by Association of the Luxembourg Fund Industry to highlight what it says is growing interest in this sector.

Islamic funds are investment vehicles that follow Shariah religious laws, such as prohibitions on the charging and receiving of interest, speculation or investment in certain commodities such as pork related products or activities such as gambling

With €4 billion ($5.18 billion) of assets under management across 41 funds, Luxembourg’s industry for such funds is the fifth largest in the world, ALFI said.  

“2012 has been a very active year for the Luxembourg Islamic finance community with several new Shariah-compliant funds launched,” said Marc Saluzzi, ALFI chairman.

The report sets out details on the legal framework, the fund set-up process, administration, custody and depository bank services for Islamic funds in the jurisdiction. It also indicates whether Islamic finance instruments are compatible with Luxembourg UCITS laws.

”Setting-up a Shariah-compliant UCITS fund in Luxembourg, opens the doors of the more than 70 countries around the world in which Luxembourg UCITS funds are currently distributed” Saluzzi said.