The UK needs new legislation to keep funds competitive with European rivals, a chief executive has claimed.
Richard Saunders, of the Investment Management Association (IMA), has called on the Treasury to introduce further tax reforms.
He said companies increasingly failed to base their new fund products in Britain "for tax reasons".
"We need a regime that does not work to the disadvantage of the UK and encourage business to move offshore," he added.
He recommended funds be treated as investing not trading, the abolition of Stamp Duty reserve tax on fund units and the removal of the ten per cent limit on single investors in Qualified Investor Schemes.
The IMA also argued the UK is losing out because offshore domiciled funds are becoming the preferred choice for investors.
Foreign cash-rich funds are increasingly looking at the UK commercial property market following recent losses, commercial property stocks are reported to be at their lowest in 20 years.