While the DIFC is arguably the most popular and successful financial centre in the Middle East, boasting more than 800 companies, including eight asset managers, it has so far struggled to build itself into a sizeable fund domicile.
The difficulties have, in part, been due to the local regime, which was established in 2006 and updated four years ago, being more complex than other “offshore” jurisdictions, or less credible than others in the EU or elsewhere.
In December last year, the DFSA set out proposals to update the existing regime again, with plans to create a new Qualified Investor Exempt Fund category, which is likely to be added to the Collective Investment Funds regime in the last quarter of this year, and to refresh the other rules.
According to Chris Harran, a national partner in the DIFC office of law firm Dechert, the changes are likely to make the centre more enticing to global asset managers, given its current attraction is “limited”.
“International interest in establishing DIFC-domiciled funds has been lukewarm for a number of reasons, ranging from the popularity, ease of establishment and relative low cost in less regulated jurisdictions, such as the Cayman Islands, to the marketing benefits and credibility that come with setting up in Luxembourg or Ireland,” said Harran.
“The present attraction for setting up funds in the DIFC appears to be limited to the likes of regional players wanting to establish a regulated fund on a local platform, foreign players wanting to access a regional investment where the GCC nationality or the UAE’s double taxation or bi-lateral investment treaties may be to their benefit, or where a specific fund regime, such as with REITs, can provide specific benefits in local property investment.”
According to the DIFC’s Londonbased senior representative for Europe and North America, Ali Hassan, the centre has been successful in encouraging asset managers to set up offices, with a further four announcing plans to open there this year.
However, Hassan said the DIFC wants to see more teams running money from the centre, with funds and their managers based there.
Harran added: “The [centre’s] popularity is growing. The proposed changes and introduction of a new type of QIF should also add a further layer of flexibility in establishing and running a DIFC-based fund.”
