- People walk near The Gate building at the financial and business district Dubai International Financial Center (DIFC) in Dubai.
- Reuters
Dubai’s financial hub is growing up. Since it was established a decade ago, the Dubai International Financial Centre has become the number one choice in the Middle East for many of the world’s leading banks, law firms, asset managers and insurers from where to conduct their regional businesses.
Now the DIFC is rolling out the red carpet for hedge funds to set up in the emirate by offering a lighter regulatory regime than in other jurisdictions where the same investors have come under tighter scrutiny since the financial crisis.
Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum recently issued the changes which will take effect today.
“The amendments are a statement of intent that Dubai is serious about competing with the major fund domiciles around the world,” says Ben Bruton, managing partner for the U.A.E. at law firm Eversheds. “They are also a sign that the DIFC is adapting and responding to market demand to attract fresh revenue into the emirate,” he says.
The law’s changes include simplifying the structure and decision making of Dubai Financial Services Authority, the center’s regulator, giving it for example new powers to suspend licenses.
But one of the biggest novelties in the amended legislation is the creation of a new category for funds called “The Qualified Investor Fund.” This type of fund is only available to professional investors who want to invest at least $500,000 and it is limited to 50 investors per fund.
“That’s very much like the style of hedge funds targeting high net worth individuals or family offices,” said Tarek Fadlallah, head of Nomura Asset Management Middle East. “This is a segment of the asset management business that the DIFC has thought about, especially as regulation of financial institutions is becoming more challenging in places like the U.K. and Switzerland,” he said.
Dubai’s financial freezone was set up in 2004 as a business-friendly hub where international companies can set up their regional headquarters within a common law framework. Last year the number of registered firms in the DIFC jumped 14% to 1039, while its workforce grew to 15,600.
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