The Dubai International Financial Centre (DIFC) is rapidly becoming a hub for hedge fund managers. It offers a world-class financial ecosystem, regulatory stability, and access to an exponentially growing pool of capital. Setting up a hedge fund in the DIFC provides legal and tax advantages and a gateway to one of the fastest-growing global wealth markets.

Surge in Hedge Fund Registration

In recent years, DIFC has seen a surge in hedge fund registrations. In 2023, the Dubai Financial Services Authority (DFSA) reported a 125% year-on-year growth in the number of hedge funds establishing in the DIFC. This trend is expected to continue as Dubai increasingly attracts international funds, especially from the U.S. and the U.K.

According to DIFC, over two-thirds of the hedge funds in the Centre originate from these markets, including two of the world’s top ten largest hedge funds.

The Growing Wealth of the UAE

The UAE is home to approximately 72,000 millionaires, making Dubai the third wealthiest city within the BRICS bloc. The UAE’s private wealth is estimated at USD 996 billion, and the number of high-net-worth individuals (HNWIs) is expected to grow by 40% by 2031. This wealth, along with the presence of institutional capital from sovereign wealth funds, is a major draw for hedge funds looking to expand in the region. Sovereign wealth funds in the Middle East have increased their allocations in alternative investments, with USD 498 billion invested in hedge funds globally by 2022.

Advantages of the DIFC

The DIFC offers several key advantages for hedge funds:

Legal and Regulatory Framework:
100% foreign ownership and repatriation of capital
English-speaking, common law judicial system
Independent, risk-based regulatory approach by the DFSA

Tax Benefits:
Zero tax on profits, capital gains, and employee income for 50 years.

Diverse Financial Ecosystem:
Access to a high concentration of international investment funds, banks, and financial institutions
Over 300 wealth and asset management firms already operate in DIFC, making it the largest market in the region

Geographic Epicenter:
Centrally located for access to emerging markets in the Middle East, Africa, and South Asia
Well-positioned to harness the growing South-South trade between Asia and Africa 

Increasing Institutional Investments

With Dubai’s business-friendly environment, hedge fund managers have access to not only private wealth but also institutional investments from sovereign wealth funds. Hedge funds operating in DIFC benefit from an 11% increase in hedge fund investments by sovereign wealth funds globally, with the Middle East leading the way.

Global Hedge Fund Landscape

While hedge funds in the U.S., U.K., and Europe hold over 94% of global assets, the Middle East is emerging as a new frontier for hedge funds. The DIFC has positioned itself as a key player in this space, with USD 450 billion in assets under management and a total industry size of USD 800 billion by the end of 2022.

The DIFC Hedge Fund Code of Practice

The DFSA has implemented a stringent Hedge Fund Code of Practice to guide fund managers on best practices. This includes detailed principles covering investment strategies, risk management, and ethical conduct, ensuring that hedge funds operating in DIFC adhere to international standards.

Why Choose NH Management?

At NH Management, we specialise in guiding hedge funds through establishing in the DIFC. With our expert knowledge of regulatory frameworks, capital requirements, and market entry strategies, we help you leverage Dubai’s dynamic financial ecosystem to grow your fund successfully. Our tailored services cover everything from business planning to compliance and capital structuring. Ready to set up your hedge fund in DIFC? Contact NH Management today at info@nhmanagement.com or call +971 4 2221327 to get started.