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Unlocking the Emirates: A fund manager’s guide to the UAE

17 June 2024

The United Arab Emirates (“UAE”) is emerging as a world-leading destination for asset managers, hedge funds, and private equity firms looking to expand their presence. Offering a range of fund management options and significant access to capital, the UAE is a burgeoning hub for financial services

The growing wealth in the Middle East, Africa, and South Asia (“MEASA”) region is sparking increased demand for tailored fund management services. With an estimated AED 3.67 trillion in assets expected to be passed on to the next generation in the Middle East over the next decade, the UAE's strategic location, sophisticated financial infrastructure, and business-friendly climate make it an appealing base for global funds seeking regional exposure (DIFC n.d.). In 2023, the Dubai Financial Services Authority (“DFSA”) reported outstanding growth, granting licenses and registrations to an unprecedented 117 companies, marking a substantial 25% increase from 2022. Notably, there was a 125% year-on-year growth in hedge funds setting up in the Dubai International Financial Centre (“DIFC”). Nearly two-thirds of hedge funds based in the DIFC hail from the US and the UK, with two of the globe's top ten largest hedge funds among them (DFSA 2024, DIFC n.d.).

The UAE has implemented several fiscal, regulatory, and social regimes to enhance its global commercial and investment appeal. These include:

Ease of doing business: The World Bank named the UAE as the top-performing country in the Gulf region for ease of doing business, ranking it 16th among 190 countries globally (World Bank 2019).

Foreign exchange controls: There are currently no foreign exchange controls that may impact on the repatriation of capital or profits.

Personal income tax: There is no personal income tax levied at the federal or emirate level.

Currency stability: The Arab Emirati Dirham (“AED”) is pegged to the US dollar (“USD”) at a constant exchange rate of 1 USD = AED 3.6725, ensuring currency stability and facilitating international trade (UAE Government Portal n.d.).

Federal budget: The UAE's federal budget for 2022–2026 totals AED 290 billion, focusing on social development, improved government services, execution of federal projects, and economic growth (UAE Ministry of Foreign Affairs n.d.).

Foreign ownership laws: Revisions to the federal Commercial Companies Law now allow foreign investors to fully own certain businesses, increasing the cap from 49% to 100% (UAE Government Portal n.d.).

Technological innovation: Ongoing investment in technological infrastructure and innovation makes the UAE an attractive hub for digital assets, fintech, and blockchain enterprises.

Work permits: In May 2023, the Federal National Council extended the validity of work permits from two to three years.

These developments contribute to the ten-year economic growth agenda unveiled by His Excellency Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, in November 2023. This agenda introduces ten key principles for the UAE's economic advancement:

  1. Strengthening the UAE’s position as a globally open free-market economy.
  2. Providing an environment that attracts and nurtures top talent.
  3. Investing in the digital economy.
  4. Integrating young Emirati talent in the country's economic model.
  5. Managing a sustainable and balanced economy.
  6. Offering a strong and stable financial system.
  7. Providing a robust and fair legislative environment.
  8. Upholding the principles of transparency and the rule of law.
  9. Developing and operating an advanced banking system.
  10. Delivering the world’s finest transport and logistics infrastructure

 (UAE Government Portal n.d.)

The UAE has established a series of free zones to support economic diversification and attract foreign investment. These zones offer benefits designed to simplify the process of setting up and operating a business, catering to a global audience. Notably, Dubai’s free zones have attracted 56% of the world’s Fortune 500 companies and more than 200,000 registered companies (Visit Dubai n.d.). The UAE stands out as a premier destination for fund managers looking to establish a presence in the MEASA region. It offers a compelling proposition for global funds with its strategic location, robust financial infrastructure, and business-friendly environment,

Looking to establish a presence in the UAE? Our comprehensive guide is curated for fund managers interested in establishing a presence in the UAE for investment management or capital raising purposes.

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