Dubai International Financial Centre (DIFC) has established itself as an investment and innovation hub in the Middle East and North Africa (MENA) region. As the destination of choice for 17 of the top 20 global banks and five of the top ten asset managers, DIFC is increasingly attracting the world’s leading hedge funds. Salmaan Jaffery, chief business development officer at DIFC, explains what attracts hedge funds to Dubai and sets this market apart from the rest.
Highlighting the scale of opportunity for hedge funds, Jaffery says, “Around $500bn worth of assets are managed by firms within the DIFC, a fifth of which, around $100bn, is portfolio managed by managers making investment allocation decisions.”
Sovereign and private wealth
Jaffery explains that while the market is known for its sovereign wealth – with around $3trn of capital in the region – a similar amount of private capital is available for investment. “There is an ongoing fundamental and structural shift in the movement and domiciliation of this private wealth,” he says.
He adds: “There are many complex reasons for the shift – ranging from global instability and political risks to intergenerational wealth transfer. Diversification too is an important factor, with people looking at a wider variety of regions and asset classes.
“We are seeing that third-generation family wealth owners, mostly Western-educated, are more likely to diversify their family holdings and more likely to invest aggressively,” Jaffery says. “This includes putting money into hedge funds, either directly or via private banks.”
He believes that in addition to the availability of investment capital, global hedge funds have identified that Dubai has everything required to drive success.
Transparency and governance
DIFC has its own independent financial services regulator, Dubai Financial Services Authority (DFSA), which has overseen the jurisdiction for 18 years. DFSA’s globally recognised levels of transparency and governance have helped attract some of the world’s most renowned companies, such as Goldman Sachs, Morgan Stanley and BlackRock, to DIFC.
“When hedge funds are looking at the region and conducting their due diligence, they understand that DIFC has the longest-established and deepest financial markets,” says Jaffery.
Safety, security and convenience
Dubai’s reputation as a safe and secure society as well as a financial centre was further enhanced by its resilience throughout the Covid pandemic. By staying open for business throughout while establishing the highest vaccination rates in the world, the emirate attracted more investors and the businesses that serve them.
Dubai’s central location, bridging time zones and markets between the East and West, adds to its attraction, as does its excellent connectivity, with 2.5 billion people reachable within a four-hour flight.
Dubai also enjoys being one of the best cities in which to live and work. When fund managers in Dubai were enjoying sunny weather and the outdoors, their colleagues in London and New York were confined to apartments during repeated lockdowns, boosting the city’s reputation as an ideal place to live and work. The absence of personal income tax is also an attractive incentive that hedge funds can use to attract talent to Dubai.
“Hedge funds need to appeal to the brightest and the best,” explains Jaffery. “That includes quantitative analysts (quants), for example, or people with an AI specialty. These people tend to be young and are seeking a vibrant and exciting place to live and work.”
Hedge funds looking to become established should know that DIFC helps them hit the ground running via immediate connection into our ecosystem.
“It is very important to develop relationships and to build trust,” states Jaffery. “It is easier to develop these relationships face-to-face. Our world-class infrastructure of hotels, galleries and restaurants makes it easier for our clients to mingle, entertain and deepen those important relationships.”
Jaffery explains that the availability of high-calibre professional advisors, such as legal and tax specialists, is also advantageous, meaning that business can be done directly within DIFC: “You don’t have to rely on long-distance relationships with lawyers in New York or London as all the top firms are present here.”
DIFC enables businesses to set up in Dubai through an easy process. All documentation, from licences to visas, is handled within the centre through a digital onboarding portal to make the process simple and streamlined. There are reduced fees for fund management licences as well as office space, with serviced ‘plug and play’ facilities meaning incoming organisations can hit the ground running.
“At DIFC, we are set up to help people develop their business and start making connections,” says Jaffery. “From helping to organise big launch events to seminars and round tables, we have teams who can take care of everything. We also ensure that business leaders can start making personal connections, which are important too.”