New UAE domestic fund agreement shows promise for global investors24 Jan 2019
Following the signing and enacting of a fund passporting agreement between the UAE's major financial regulators, it is now possible to license and promote a domestic fund that is regulated under one jurisdiction, across the UAE.
The new funds passporting agreement is expected to establish the development of the domestic funds market across the wider UAE, enhancing its financial appeal to both foreign and domestic fund managers and investors.
The agreement was signed on the 27th November 2018 by the Securities and Commodities Authority (SCA), the Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM). Subsequent to the signing of the agreement, the DFSA’s Rulebook will be amended accordingly. The deadline for providing such comments on the proposed amendments was 3rd January 2019 and the DFSA Rules resulting from the Funds Passporting Agreement came into effect on 25th February 2019.
Benefits of the agreement
The coming together of the different authorities further promotes the emergence of the domestic investment funds regime. This will enable funds to be marketed onshore across various jurisdictions in the UAE for the first time, rather than being exclusive to free zones.
The added exposure will give domestic funds further marketing reach, making their establishment a more viable option for foreign and domestic investors and fund managers. For example, although a domestic fund may be established in the Dubai International Financial Centre (the “DIFC”) and licensed by the DFSA, under the new passporting agreement, the same fund will now be licensed to market across the UAE, providing wider scope and opportunities for investors.
By agreeing on a common legislative framework, the UAE financial authorities can facilitate a shared regulatory regime when licensing domestic funds. This is set to provide a greater degree of protection to investors through the sharing of regulatory information in relation to the sale and promotion of domestic funds in the UAE. This collaborative regulatory approach also ensures that the international financial centre maintains a strong confidence within the fund industry.
Supporting an international ambition
Domestic funds in the UAE are not a recent development, however a surge in their emergence has been noted within the market, for example 39 qualified investor funds (QIFs) have been launched since March 2015. Notably, 20 of these were launched in 2018, demonstrating a rapid increase in their appeal for both domestic and foreign fund managers and investors. Other fund products within the UAE such as domestic public funds and exempt funds are also emerging as prominent products within the collective investment market.
The new passporting regime will make it easier for investors to access growth opportunities, enabling the UAE to continue its economic development by bolstering its attractiveness as the leading business and financial hub in the Middle East, Africa and South Asia (MEASA) region.
The move is yet another step towards the UAE achieving its ‘2021 Vision’ of becoming the economic capital for over two billion people, compounding its efforts to attract foreign investment to the country, as epitomised by the upcoming Expo 2020. And with the 2017 DIFC Wealth and Asset Management Report revealing that UAE fund managers are expected to see their AUM grow from $1.6 billion to $18.9 billion in 2020, it appears the UAE funds market is set for exponential growth.
Ocorian’s Existing Presence in the GCC Region
Our investment in the region and long standing relationships with GCC based fund managers and investors enables us to provide a fund administration service that recognises GCC customs and regulations. Our UAE branch based in the financial hub of Dubai, the DIFC, is a licensed and regulated DFSA Fund Administrator and can provide full administration services in relation to domestic and foreign funds. These services include; fund establishment and setup, investor onboarding, accounting and cash management services and a familiarity with DFSA regulatory requirements in relation to domestic funds and fund managers. We have a global offering of funds expertise spanning across multiple jurisdictions which can be used to assist with the setting up of new fund managers in the DIFC for those hoping to establish domestic funds.
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