September 21, 2020

Lighter regulations at DIFC attract three new funds


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&MaxW=640&imageVersion=default&AR-141009554By John Everington From The National

Dubai’s financial hub is set to attract at least three new funds by the end of the year as a new, lighter-touch policy starts to reap rewards.

It will come as a boost to the Dubai International Financial Centre (), which is seeking to attract more funds targeting high net worth individuals.

The DIFC formally launched the Qualified Investor Fund () structure last week after the plan was formally approved in August.

Two Dubai-based law firms said they were undertaking the preparatory work for new funds using the structure, with a view to launching them before the end of the year.

Hardeep Plahe, a Dubai-based partner with Gibson, Dunn & Crutcher, said that his firm had already begun working on a fund targeting such investors on behalf of a GCC-based institution, looking to offer it before the end of the year.

“We were working on a fund [targeting high-end investors] before the new structure was announced,” said . “The QIF regime came through and has made it a lot easier to set up the fund, particularly given the type of investors the fund is aimed at.”

Chris Harren, a national partner with Dechert in Dubai, said that his firm was working on two funds using the QIF structure, declining to give details about the institutions involved. Both funds are set to be launched before the end of the year.

The QIF structure is designed to be offered only through private placement to experienced investors, with a minimum investment of US$500,000 per investor and a maximum of 50 people per fund.

Crucially, QIFs will be subject to far less stringent regulation than the DIFC’s existing fund structures, with no requirement to file interim reports on their operations and the ability to invest in funds of funds, among other exemptions.

The introduction of the new structure follows a realisation by the DIFC that its pre-existing funds regime had put too heavy a compliance burden on institutions looking to offer lightly regulated funds to professional investors – common in jurisdictions such as the – that do not require the same regulatory protection as retail clients.

Faced with such regulatory and compliance requirements, only 11 funds have been domiciled in the DIFC to date, although this is set to change rapidly, said Mr Plahe.

“I’m optimistic that this new structure is going to be the catalyst the DIFC needs for another influx of fund managers and funds,” he said, noting that several parties including private equity houses had already approached his firm about the possibility of establishing funds using the new structure.

“I wouldn’t be surprised if this time next year we’ll have another 20 funds set up.”

The new structure is a sign of Dubai’s desire to compete with major global fund domiciles such as Luxembourg and the Cayman Islands, and of the DIFC’s commitment to adapting to market demand, said Ben Bruton, the managing partner of Eversheds in the UAE.

“The changes appear to acknowledge the challenge of making sure that the regulatory burden in the DIFC is sufficiently light to be attractive for fund managers from a cost of entry perspective, while ensuring that investors have the protections that come with a robust regulatory framework,” he said.

IMAGE: Qualified Investor Funds s will be subject to far less stringent regulation than the DIFC’s existing fund structures. Lee Hoagland / The National

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