Setting Up a Fund in Dubai

DIFC (Dubai International Financial Centre) and ADGM (Abu Dhabi Global Market) are both English common law financial free zones with independent regulators. DIFC is more established (20+ years, 8,800+ companies, 100+ hedge funds) and has a larger ecosystem of service providers. ADGM is newer, often more cost-effective (USD 50K base capital vs USD 70K), and has been particularly aggressive in attracting PE, VC, and digital asset funds. Both offer 0% corporate tax on qualifying income and passporting between each other.

The mainland is now regulated by the Capital Market Authority (CMA), which replaced the SCA on 1 January 2026. Mainland fund management operates under UAE civil law (not English common law), has no External Fund Manager route, applies 9% corporate tax, and has longer licensing timelines (6-12 months). Most international fund sponsors choose DIFC or ADGM unless they need retail distribution across the UAE or manage mainland-listed securities.

A passporting regime allows DIFC fund managers to register their funds for marketing in ADGM and vice versa. However, you typically hold your licence in one jurisdiction. Some groups set up the fund manager in one centre and SPVs in the other.

DIFC is the established choice - 81 of its 100+ hedge fund managers have over USD 1 billion in AUM. The DFSA offers fast-track licensing for fund managers (Category 3C), and the ecosystem of prime brokers, fund administrators, auditors, and lawyers is deeper in DIFC. ADGM is competitive for smaller or emerging managers, particularly with its proposed Small Threshold Fund Manager (STFM) regime for managers under USD 200M.

Both DIFC and ADGM offer VC-specific pathways. DFSA has nil base capital requirement for VC-only fund managers. ADGM's FSRA also has a lighter VC fund manager track. DIFC's Innovation Hub and FinTech Hive provide additional support infrastructure for VC managers. ADGM may offer more flexible conditions for digital asset-focused VC funds.

A Category 3C licence from the DFSA, which authorises 'Managing a Collective Investment Fund.' This also includes the right to manage assets (discretionary portfolio management) in respect of the fund. If you want standalone discretionary portfolio management for separate accounts, you may need a broader permission.

USD 70,000 for managers of Exempt Funds and Qualified Investor Funds. USD 140,000 for managers of Public Funds. The actual requirement is the higher of base capital, risk-based capital, or expenditure-based capital (13/52 of annual audited operating expenses). For a manager with USD 1M annual operating costs, the expenditure-based component alone would exceed USD 346,000.

4-6 months from application to licence. The DFSA offers a fast-track process for fund manager applications. You cannot apply for a fund until the fund manager licence is complete.

Senior Executive Officer (ordinarily resident in the UAE), Finance Officer, Compliance Officer, Money Laundering Reporting Officer (MLRO), and an independent Board with at least one non-executive director as Chair. In group structures, some roles can be drawn from the parent entity.

Yes. A fund manager licensed in an acceptable jurisdiction can manage a DIFC-domiciled fund without a DFSA licence, provided they appoint a DFSA-licensed Fund Administrator or Trustee as local agent. The local agent maintains the unitholder register and makes the prospectus available to investors. This route is used by established managers who want DIFC fund vehicles without relocating their management function.

A QIF is a fund open only to professional clients with a minimum subscription of USD 500,000. QIFs enjoy the lightest regulatory regime - a 2-day self-certification fast-track notification process with the DFSA. Most institutional managers launching in DIFC use QIFs.

Public Funds are open to retail investors with no minimum subscription - they require the most regulation. Exempt Funds are for professional clients only (minimum USD 50,000 subscription) and enjoy a 5-day DFSA fast-track notification. QIFs are for professional clients (minimum USD 500,000) with 2-day self-certification. Most international fund managers use Exempt Funds or QIFs.

DIFC Authority fees include: name reservation ($800, one-time), incorporation ($8,000, one-time), commercial licence ($12,000/year), establishment card ($618/year), personnel sponsorship deposit ($680), and data protection fee ($1,250/year). DFSA regulatory fees range from $2,000-$25,000/year depending on fund type, plus $1,000-$4,000 per fund per year. Total first-year costs including legal, compliance setup, and office space typically range from $50,000-$200,000+.

DIFC commercial licence ($12,000/year), DFSA annual fees ($2,000-$25,000), per-fund fees ($1,000-$4,000 each), office rent, visa costs, compliance officer salary, audit fees (mandatory annual audit by DFSA-recognised auditor), and professional indemnity insurance. Budget $80,000-$300,000+ annually depending on fund complexity and team size.

DIFC offers 0% corporate tax on qualifying income for 50 years from incorporation. However, non-qualifying income may be subject to the standard UAE 9% corporate tax. Since 2025, Qualifying Free Zone Persons must maintain audited financial statements - failure to meet QFZP conditions loses the 0% rate for that tax period and the next four. Seek tax advice on your specific structure.

DFSA mandates PI cover for regulated entities. DIFC, ADGM, and DMCC all require PI insurance for professional service firms. Providers in the DIFC include Berkshire Hathaway (BHSI), AIG, and specialist brokers. Costs vary by fund size and strategy.

Investment Companies (most common), Investment Trusts (used for property funds), and Investment Partnerships (used for PE, VC, and hedge funds). DIFC also supports Protected Cell Companies (PCCs) and Incorporated Cell Companies (ICCs) for umbrella fund structures.

Islamic Funds, Feeder Funds, Master Funds, Private Equity Funds, Property Funds, REITs, Hedge Funds, Umbrella Funds, Money Market Funds, ETFs, Venture Capital Funds, and Credit Funds.

Company Limited by Shares (LTD/PLC), LLC, Branch Office, LLP, LP, GP, SPV/Prescribed Company, Foundation, and Non-Profit Incorporated Organisation (NPIO). For fund managers, the most common is a Company Limited by Shares (LTD).

Fund administrator (NAV calculation, investor reporting), custodian (asset safekeeping), auditor (annual financial statements, DFSA-recognised), prime broker (trade execution, use), legal counsel (offering documents, regulatory filings), compliance consultant (AML/KYC programme), bank (cash custodian, investor subscriptions/redemptions), and insurance broker (PI/D&O cover). Some providers combine multiple roles.

For QIFs and Exempt Funds, you may choose to perform fund administration in-house. However, institutional LPs strongly prefer independent third-party fund administrators for governance and valuation independence. For Public Funds, a DFSA-licensed Fund Administrator is required.

The DFSA generally requires an independent custodian unless the prime broker meets eligible-custodian criteria (segregation, capital, and regulatory status). Large funds often separate prime and custody relationships. When evaluating custodians, consider disaster recovery, local-market settlement capabilities, and capacity to handle complex assets.

Every DIFC fund requires an annual audit by a DFSA-recognised auditor. The auditor signs financial statements, reviews valuation methodology, and confirms capital-adequacy ratios. Engagement letters set reporting timelines, materiality thresholds, and fees.

Annual fund reporting to DFSA by 31 January (covering the preceding calendar year), maintenance of capital adequacy ratios, AML/KYC programme maintenance, annual audit, ongoing fit-and-proper requirements for key personnel, and periodic supervisory reviews. The DFSA takes a proactive supervisory approach including site visits, thematic reviews, and risk-based inspections.

DIFC-domiciled funds can be marketed to DIFC investors and, via passporting, to ADGM investors. Marketing to mainland UAE investors requires CMA compliance. Marketing to foreign investors follows the relevant foreign jurisdiction's rules. Reverse solicitation is not codified in UAE law and is not reliable.

DFSA prudential amendments take effect 1 July 2026 (capital requirements and reporting changes). UAE e-invoicing rollout starts July 2026 (mandatory for AED 50M+ revenue businesses by January 2027). DFSA crypto token framework changes (January 2026). Dubai contracting law (Law No. 7 of 2025) affects contractor relationships.

At minimum: deal analysis platform, document management system, secure communications, financial reporting, cybersecurity infrastructure, and investor reporting portal. Self-hosted platforms provide data sovereignty advantages. 85% of LP rejections cite operational concerns - technology infrastructure is your defence.

DiligenceWorks provides AI-powered deal analysis (adversarial verification of pitch decks and investment documents), self-hosted on infrastructure you control. It covers steps 1-4 of a fund manager's technology checklist: data sovereignty, deal analysis, document management, and compliance-ready reporting. It integrates with your fund administrator, auditor, and CRM.