Banking & Finance

Fund managers hedge bets between Dubai and Abu Dhabi

November 1, 2023, 9:10 AM

The DIFC Gate Building, as seen from a drone camera. The free zone opened in 2004

Funds opting for bases in both DIFC and ADGM
‘A lot of movement’ from UK investors
Conference dubs UAE ‘global hedge fund hotspot’

A growing number of hedge funds are choosing to register in both the UAE’s financial hubs, according to the CEO of a consultancy that advises businesses on setting up in the Emirates.

Clare Curtis, CEO of Effecta Compliance, told an investment conference on Monday that there was strong interest in the Dubai International Financial Centre and the Abu Dhabi Global Market from funds based in the US, Asia and Europe.

“We’ve seen in the last three to six months firms deciding to set up in both the DIFC and ADGM,” Curtis said at the AIM Summit in Dubai.

Effecta has seen “a lot of movement” from UK funds in particular, she added.

The DIFC had 40 licensed hedge fund managers operating under its jurisdiction at the end of 2022, a 13 percent increase on 2021. It is expected to have 70 hedge funds by the end of this year.

The Dubai zone has more than 350 asset management companies in total, including hedge funds and private equity ventures.

ADGM has a pipeline of up to 30 hedge funds set to join, bringing the total number of asset managers to 100.

Curtis, speaking during a conference session called “Lifting the lid on the UAE: The new global hedge fund hotspot”, said there were some core differences between the two free zones.

The DIFC opened in 2004, while the ADGM began operations in 2015. They differ in their application of English law, court systems, arbitration and insolvency law regulations.

“We know that Abu Dhabi is just down the road effectively and yet what we’re looking at is two very separate entities,” said Curtis.

While the DIFC is considered by some “much more vibrant” from a staffing and infrastructure perspective, she pointed out that Abu Dhabi has a number of the world’s largest sovereign wealth funds. These include the Abu Dhabi Investment Authority, Mubadala and ADQ.

These huge entities often place money in alternative investment strategies such as hedge funds.

“If you’re looking more strategically, as we were, you tend to look towards Abu Dhabi because that’s where the money is, you have a unified regulator, you have a very efficient regulator,” said Ryan Taylor, group head of compliance at Brevan Howard, who was also on the conference panel.

The ADGM regulator first issued rules on digital securities in 2020

Brevan Howard, a global alternative investment manager with more than $33 billion in assets under management, opened its regional hub at Al Sarab Tower in the ADGM in February.

Curtis added that Dubai was playing catch-up to Abu Dhabi on crypto regulation.

“I think the DIFC has been a bit slow on the uptake of crypto. I think the ADGM has moved much quicker in that area,” she said.

ADGM was the first jurisdiction in the world to develop and implement a full framework for virtual asset activities.

In 2020, its Financial Services Regulatory Authority issued guidance in relation to the regulation of digital securities activities, followed in 2022 by the issuance of the Guidance on the Regulation of Virtual Asset Activities.

In early 2022, Dubai introduced the Virtual Assets Law and established the Virtual Assets Regulatory Authority as the emirate’s primary virtual assets regulator.

Thierry Adant, chief investment officer of Newmarket Capital and Battery Finance, told the panel: “The attraction for us, looking at the UAE, but in particular Abu Dhabi, is that it has super clarity from a regulatory perspective.”