DIFC positioned as the central hub for Hedge
Funds in the region

Hedge funds are showing increasing interest in Dubai as a gateway to the region, looking to establish a presence in DIFC – a rising global hub for alternative investments and hedge funds. DIFC also boasts a unique offering of ecosystem benefits, particularly for hedge funds, in addition to additional regulatory, infrastructure, and environmental advantages at the emirate level. DIFC has more than 60 hedge funds already registered or in the pipeline and 55% of DIFC-based hedge funds originate from US & UK. The migration of hedge funds to DIFC from other global and regional centres reinforces Dubai’s reputation as the region’s leading financial centre and business capital. It also reflects the emirate’s ability to attract top talent and provide access to large concentrations of public and private capital.

The Dubai Financial Services Authority (DFSA), which is globally recognized for its transparency and governance, has always been an accessible and collaborative regulator. While overseeing the DIFC jurisdiction for almost 20 years now, the DFSA frequently consults with the industry, unlike markets where funds have continued to become frustrated by slow and rigid approaches

“DIFC is delighted to welcome our new hedge fund clients to the Centre thereby continuing our remarkable growth as a rising global hub for hedge funds and certainly the region’s largest hedge fund market. Our new clients will manage and grow their business by attracting top global talent and by tapping into deep pools of public and private capital accessible in, and from Dubai.”

Salmaan Jaffery, Chief Business Development Officer, DIFC Authority,

Alongside an environment of ambitious innovation, the DIFC ecosystem also provides the perfect set of partners for funds and their portfolio managers looking to establish in Dubai. Hedge funds can hit the ground running with unparalleled access to high-caliber professional advisors, including law firms, consultancies, and tax specialists within the Centre

DIFC’s world-class ecosystem and infrastructure to support hedge fund capabilities

DIFC is the largest financial services ecosystem in the region and has become a preferred destination for financial institutions from all sectors. It is widely regarded as being on par with the world’s leading financial centres.
Financial institutions, hedge funds included, recognize DIFC’s governmental support, ease of doing business, market-leading operating environment, innovation offering, depth of ecosystem, and forward-thinking legal and regulatory framework. The quality and range of DIFC’s independent regulation, common law framework, supportive infrastructure, and tax-friendly regime make it an ideal base to satisfy the region’s rapidly growing demand for financial and business services.

A regulatory framework that fosters facilitation and aligns seamlessly with international standards.

DIFC’s regulatory model centres on an independent risk-based regulator, the Dubai Financial Services Authority (DFSA), closely modeled on legislation employed in London and New York. In addition to granting licenses, the DFSA regulates all financial institutions, including hedge funds, in DIFC and oversees a legislative system that is consistent with English Common law – the global standard for financial services. The regulator also consults on prospective regulations with industry stakeholders. DIFC has its own set of civil and commercial laws and regulations, in addition to an independent judicial system represented by DIFC Courts, which have exclusive jurisdiction over all civil and commercial disputes arising within DIFC and relating to DIFC-registered entities. The Centre has also made several enhancements for hedge fund clients looking to domicile both their manager and funds at DIFC. It waives DIFC registration costs, reduces regulatory capital, and lowers regulatory fees by as much as 60–80 percent. Hedge funds based in DIFC can be set up as Qualified Investor Funds, Public Funds, or Exempt Funds. The latter are subject to lower regulation in DIFC as they are open to accredited or professional clients only. These funds are also subject to lower base capital requirements – USD 70,000 as opposed to USD 500,000 for public funds – and a fast-track application process which the DFSA aims to complete within five days.

Hedge Funds in DIFC

The Fund Manager of a Hedge Fund is responsible for ensuring that risks associated with the Fund are adequately managed by:

Ensuring that there is adequate segregation of duties between the investment function and the Fund valuation process;

Observing best practice standards and guidance issued by the DFSA, in particular, the DFSA Hedge Fund Code of Practice; and

Observing the requirements that relate to the appointment of prime brokers with authority to combine the assets of the Fund with any other assets, which can only be done in respect of Exempt Funds, and not Public Funds.

DFSA Hedge fund can be a Public Fund or a Professional Fund

Public Funds

Public Funds are open to Retail Clients (as defined by the DIFC), and hence subject to higher levels of regulation. The other features of a Public Fund in the DIFC are:

1. No minimum subscription limit.
2. Units are offered to the general public.
3. Can have any number of unit-holders.
4. Have to comply with IOSCO principles.

Exempt Funds

Exempt Funds are open only to Professional Clients (as defined by the DIFC). The other features of an EF are:

1. Minimum subscription of US$ 50,000.
2. Units are offered to persons only by way of a Private Placement.

Qualified Investor Funds

Qualified Investor Funds are open only to Professional Clients (as defined by the DIFC). The other features of a QIF are:

1. Minimum subscription of US$ 500,000.
2. Units are offered to persons only by way of a Private Placement.

How MS can help you in DIFC?

We offer end-to-end support for Hedge Fund license applications, guiding you through the entire process. From initial consultations to authorization assistance and the preparation of legal documentation, MS Facilitators ensure your application aligns seamlessly with the DFSA Rulebook, guaranteeing comprehensiveness and compliance.

Our comprehensive services encompass: