Open an Investment Fund in Dubai
Open an Investment Fund in DubaiUpdated on Wednesday 16th January 2019
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Investors who want to open an investment fund in Dubai enjoy a modern regulatory regime for the types of available funds. The fund regime in Dubai is in line with the existing international standards. The Dubai International Financial Centre (DIFC) is the prime location to base a fund in Dubai. The Dubai Financial Services Authority (DFSA) is the regulating agency of the DIFC and the one that imposes the rules and regulations for investment funds, investment restrictions and transaction requirements.
One of the experts at our law firm in Dubai can give you complete details about the regulatory framework set forth by the Dubai Financial Services Authority.
Types of funds in Dubai
Two types of funds can be set-up in the Dubai International Financial Centre: the public fund and the exempt fund. A licensed fund manager or an external fund manager must manage these funds. One of our lawyers in Dubai can tell you more about the licensing requirements for fund managers in Dubai.
The public funds in Dubai are used by retail investors and they observe the international standards for investor protection. These types of funds are subject to extensive disclosure requirements so that investors may make an informed investment decision.
The exempt funds in Dubai are used by professional investors. A minimum investment of USD 50,000 is required for this type of funds. These cannot be traded publicly and have a limit of only 100 unitholders. As for the special funds in Dubai, these include the following:
- - Islamic funds: set-up and managed according to the Shari’a system;
- - hedge funds;
- - property funds;
- - private equity funds;
- - real estate investment trusts (property funds).
We have prepared a video about how to open an investment fund in Dubai:
The registration of an investment fund in Dubai
The registration of an investment fund in Dubai starts at the time the owner decides on the management of the fund which can be a partnership, a trust or a company. The Department of Economic Development is the institution in charge of registering the investment funds through the chosen vehicle if at least 50 investors are part of such fund. Dubai International Financial Center or DIFC is a special economic zone and an international hub preferred for investments by foreign investors. Also, it is good to know that the Dubai Financial Services Authority or DFSA is the regulatory body for investment funds in Dubai.
Managing a domestic or an external fund in Dubai
A domestic fund opened in Dubai must be created in respect with the Collective Investment Rules and the Collective Investment Law. The manager of a domestic fund needs to consider the financial risks and must ensure complete management in agreement with the constitutive documents of the fund and its operations. As for the external funds established in Dubai, the manager of such funds needs to comply with the conditions in the country of jurisdiction and must inform the DFSA that such investment fund has been established. It is good to know that the external funds can be managed by domestic funds, overseen by DFSA, if such funds are established in DIFC. A DFSA licensed fund manager is appointed for such investment funds in Dubai and he/she will be the connection between the investors and DFSA.
Investment and borrowing restrictions for funds in Dubai
When it comes to stock borrowing or lending, the value of the insurance needs to be the same with the transferred security. It is forbidden to borrow more than 20% of the net asset value of the investment fund. Moreover, a special resolution needs to be created, with the acceptance of the investment holders, in the case of stock lending and borrowing. The fund manager oversees such actions and if certain restrictions need to be imposed, he/she or the company may act so. Feel free to discover the legal aspects of investment funds in Dubai from our lawyers in Dubai.
Open-ended funds in Dubai
Open-ended funds are available in Dubai and refer to the type of investments where the foreign investors have the possibility of issuing an unlimited number of shares by investing in stocks and bonds. Such an investment fund can be traded on the local exchange market taking into account the net asset value or NAV as it is called. An open-ended investment fund in Dubai is preferred by many foreign investors because there is no need to place big sums of money for opening such fund. When deciding on an open-ended investment fund in Dubai, businessmen should pay attention to the investment plan and the ways the financial purposes if such fund can be achieved. An open-ended investment fund in Dubai is normally established with the help of an appointed portfolio administrator. Among the advantages of such an investment fund is the stability provided to foreign entrepreneurs looking to set up an open-ended investment fund in Dubai. Feel free to get in touch with our team of attorneys in Dubai and find out more about how you can open an investment fund in Dubai.
Hedge funds in Dubai
If you would like to open a hedge fund in Dubai, you should, first of all, observe the regulations for this type of vehicle. Among these, creating the prospectus with information about the investment plan, the business strategies, the owners, the value of the assets and the ways in which the fund will be administrated is extremely important. A hedge fund is established once a legal entity is registered in Dubai and especially in DIFC. Hedge funds in the UAE are established with a special financial requirement of AED 10 million. A hedge fund needs to be properly promoted in the business area it is created and with the help of varied promotion strategies. Foreign investors in Dubai can also solicit the support of wealth management companies in Dubai, which are ready to implement a series of business plans for sustaining and promoting the hedge fund.
Rules and regulations for funds in Dubai
Funds set-up in Dubai must appoint a fund manager or asset manager. This individual must be licensed by the DFSA. There are two types of fund managers in Dubai:
- the domestic fund manager: operates in the DIFC and is licensed by the DFSA and offers his financial services for the purpose of managing a collective investment fund;
- the external fund manager: he is licensed and allowed to establish a domestic fund in Dubai without having a place of business within the DIFC; he must be licensed by a recognized Financial Services Regulator.
A number of fees are applicable to funds and fund managers in Dubai. These apply for a licensing application, the annual license fee, an annual fee per fund or the public fund registration fee. One of our attorneys in Dubai can give you more information about how these fees apply.
Short conclusion about investment funds in Dubai
Private equity funds, master funds, property funds, hedge funds, umbrella funds, real estate investment funds, open-ended and close-ended investment funds can be established by foreign entrepreneurs in Dubai, in respect with the regulations of DFSA, DIFC and the related legislation. A fund manager is a mandatory condition for opening an investment fund, plus the obligation of establishing a legal entity for any kind of investment fund. You may talk to our advisors and find out more details in this sense.
For more information about investing in the DIFC please contact our law firm in Dubai.