The rise of funds in the DIFC
The rise of funds in the DIFC
3 min read
The Dubai International Financial Centre (DIFC) is becoming an increasingly popular destination for fund establishment. But what types of funds are being established and why is the DIFC a destination of choice for fund managers in the Gulf Cooperation Council region? Manager of Alternative Investments - UAE, Kathryn Miller explores...
As the UAE goes into overdrive ahead of next year's Expo 2020 in Dubai, the DIFC has been experiencing its very own evolution. Over the past year, it has played host to a significant rise in activity concerning the establishment of collective investment structures.
The news came as the regulator of the DIFC, the Dubai Financial Services Authority (DFSA), released a number of statistics pertaining to DIFC funds at the Middle East Wealth Management Forum held on 22nd January 2019. Notable statistics include:
What do the statistics tell us?
The surge in fund activity and the increase in the amount of established fund managers demonstrates the swelling reputation of the DIFC as a hospitable business environment. This is especially true for fund managers with strategies in the Middle East and North Africa (MENA) regions, with the UAE providing an efficient base from which to conduct business.
The recent statistics released by the DFSA also demonstrate the current trends in the types of funds and collective investment structures being utilised in the DIFC which include, among others:
- Private Equity Funds
- Property Funds
- Islamic Funds
- Trade Finance Funds
- Fixed Income Funds
- Umbrella/Protected Cell Company (PCC) structures
- Real Estate Investment Trusts (REITs)
This hyperactivity within the funds sector comes at a time when the industry has experienced a boost in the form of regulatory amendments and the enhancement of its domestic funds regime.
Recent catalysts for the DIFC funds industry
Many of the recent amendments made by the DFSA to the Collective Investment Law have allowed for more variance in the products available to fund managers in the DIFC. This has created a further opportunity for the expansion of the funds industry and has made the DIFC a jurisdiction of choice for fund managers and investors looking to expand their portfolios into the MENA region.
In support of this initiative to attract further investment in the region, a fund passporting agreement was signed between the UAE's major financial regulators in November 2018 and the relevant amendments to the DFSA Rulebook were made effective from 25 February 2019. It is expected to enhance the domestic funds market across the wider UAE, making it possible to license and promote a domestic fund that is regulated under one jurisdiction, across the whole of the UAE. This will, inevitably, enhance the country's financial appeal to both domestic and foreign fund managers and investors.
The integral role of the fund administrator
As the number of domestic funds being established in the DIFC increases, the presence of fund administrators with expertise and knowledge of the Gulf Cooperation Council region has become imperative.
Excellent corporate governance and fulfilling regulatory requirements should be at the forefront of any collective investment structure and in order to achieve this, sophisticated fund managers outsource the administration of their funds and vehicles to high-tier, regulated fund administrators.