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Global hedge funds expand presence in Dubai and Abu Dhabi

About 50 asset managers that conduct hedge fund activities are registered at DIFC in Dubai Alamy via Reuters
About 50 asset managers that conduct hedge fund activities are registered at DIFC in Dubai
  • 13 of top 100 funds operate in UAE
  • Middle East a ‘nascent market’
  • 55% of DIFC funds from US and UK

Thirteen of the world’s top 100 hedge funds have offices in the Dubai International Finance Centre, research shows, as more of the specialist asset managers set up operations in the UAE.

It is a similar story in the newer-established Abu Dhabi Global Market, where Brevan Howard – the world’s 13th-largest hedge fund by assets under management (AuM) – said last November that it would double its ADGM-based workforce to 120 by early 2024. It has also moved a trading desk to the UAE capital.

Dubai is 20th in the Global Financial Centres Index, which is compiled by think tank Z/Yen. Abu Dhabi is 37th. The two cities are first and second in the Middle East and Africa.

Unlike mutual funds, which pool investors’ money to buy stocks, bonds and other securities, hedge funds tend to deploy riskier strategies to try to provide bigger returns.

A hedge fund may borrow money and trade derivatives including futures and options contracts as well as shorting stocks. Hedge funds usually have a longer lock-in period for investors, while also charging higher fees.

Hedge funds’ total assets under management are $5.1 trillion, according to BarclayHedge. Growth has been relatively sluggish since 2021, but the industry’s total is 64 percent higher than in 2019.

About 50 companies that conduct hedge fund activities are registered at DIFC, Dubai’s offshore financial free zone. Of these, nearly 40 have at least $1 billion in assets under management.

“The Middle East is a nascent market for hedge funds,” says a May report co-authored by DIFC and Refinitiv.

In all, 13 of the 100 largest hedge funds by AuM have offices in the UAE. This calculation considers only a company’s hedge fund assets. For example, BlackRock Advisors is 22nd globally with a hedge fund AuM of $22.6 billion. Yet BlackRock’s total AuM is more than $10 trillion.

Of the hedge funds with offices in DIFC, 55 percent are from the United States or United Kingdom, according to the report.

At rival ADGM, about 40 percent of its 52 registered asset and wealth management companies conduct hedge fund activities. These include Kuwait’s NBK Capital Partners.

TCI Fund Management, ranked sixth globally among hedge funds by AuM, opened an office in ADGM last November. Abu Dhabi’s financial free zone offers various incentives to companies including 0 percent tax on profits and no restrictions on repatriating money.

Less than 1 percent of hedge funds’ global AuM is in the Middle East, the DIFC report estimates.

“Since the pandemic, growing numbers of hedge fund managers have been looking to expand in or relocate their operations to Dubai in order to not only tap into the region’s rising high-net-worth retail and institutional wealth, but also manage and invest this money from DIFC,” the report adds.

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