Launching a Fund in the Abu Dhabi Global Market
Tapping Into Innovation, Capital, and Connections
The Abu Dhabi Global Market (ADGM) is fertile ground for global assets and fund managers seeking a foothold in the Middle East market. This paper explores some of the distinct advantages ADGM offers, as well as some of the operational challenges involved in launching a fund and solutions for meeting them.
Launched in 2015 in the United Arab Emirates’ capital city, Abu Dhabi Global Market (ADGM) is a relative newcomer among the world’s designated International Financial Centres but has already attracted more than 100 global asset managers and firms. Leading hedge, private equity, and venture capital funds from around the world operate side by side with locally grown institutional funds, both private and government-sponsored.
Operating on a mandate to develop the UAE financial sector, stimulate innovation and attract investment, ADGM offers a variety of incentives for fund managers to set up in the zone, as well as support services to help streamline the process. Moreover, the centre boasts a growing ecosystem of global and regional banks, legal advisors, professional services firms, and technology and service providers.
Why ADGM?
ADGM offers a variety of advantages to firms looking for a viable fund domicile for tapping into opportunities in the Middle East and beyond, including:
Access to Capital Resources
Abu Dhabi is home to three of the region’s largest sovereign wealth funds that own, invest in and manage a wide range of assets. Some 16 single-family offices also figure prominently in ADGM capital resource pool, along with a number of private capital providers.
Progressive Regulatory Framework
The regulatory environment in ADGM is designed to help accelerate the establishment of qualified fund businesses through an efficient and cost-effective authorization process. The UAE’s Financial Services Regulatory Authority (FSRA) is responsible for licensing and regulating all financial entities and activities within the centre. In-principle approval and licensing takes around 12 to 14 weeks in most cases. Notably, ADGM is the first jurisdiction in the Middle East to directly apply English common law in the resolution of commercial and civil disputes, which has helped instil confidence in the legal system on the part of market participants.
Tax Advantages
Although the UAE Corporate Federal Tax has been introduced this year, many entities established in ADGM will enjoy 0% Corporate Tax applicable to them. Regardless of whether income is earned from the free zone, the mainland, or overseas, many activities belonging to regulated banking, insurance, finance, leasing and ownership of intellectual property assets will be excluded. Specifically, these categories include fund management, wealth and investment management and investment holding companies that are considered as exclusions. This exclusion however does not allow most ADGM companies exemption from registering for the UAE Corporate Tax.
In addition to the above points, fund managers are not taxed on receipt of management fees or carried interest. There is no withholding tax on domestic and cross-border payments. ADGM also has favourable double-taxation treaties with a vast network of jurisdictions around the globe.
Financial Ecosystem
More than 60 global and regional financial institutions, including banks and insurers, have a presence in ADGM, enabling easy access to deposit accounts and working capital.
Support for New Entrants
ADGM Authority has a dedicated team to work with firms seeking to set up in the centre, providing support in such areas as:
Licensing
Working with regulators to fast-track the process and helping ensure applications are in order
Relocation services
Helping arrange both temporary and permanent residences for executives, employees and their families
Office space
Helping identify suitable quarters within the centre and expediting the leasing process
Talent recruitment
With access to the region’s growing financial skills base, as well as university programs, and partnerships with leading recruitment firms
Capital introductions
Leveraging our extensive network of local contacts to arrange introductions and face-to-face meetings
ADGM Fund Industry by Numbers
46
Firms Granted In-Principle Approval (IPA) in H1-2023
119% Increase in IPAs vs. H1-2022
Source: Abu Dhabi Global Market, as of June 2023
The good news is that ADGM offers a growing network of fund administrators, operational services providers and financial technology companies.
Meeting the Operational Challenges
Globally, there are many compelling opportunities for global asset management firms and fund mangers. However, these opportunities are faced with several challenges especially when it comes to setting up a robust operational infrastructure that goes beyond regulatory approval and capital raising. Firms that try to build their infrastructure and perform all operational activity internally will likely face a big upfront investment and lengthy development cycle, slowing their time to market – and with no assurance of satisfactory results. Firms with experience in the region cite such operational issues as time-consuming, manual investor onboarding processes, fragmented systems that don’t communicate with each other, and client demands for transparency, among others.
The good news is that ADGM offers a growing network of fund administrators, operational services providers and financial technology companies. Fund firms located in the centre should look at the outsourcing option as part of their overall set-up plan. By delegating fund administration, technology management and certain operational activities to an outside expert, firms can realize the benefits of efficiency, data integrity and real-time client reporting right from the start. Outsourcing frees fund managers to focus on capital raising and investment decisions.
Not all outsourcing providers are alike, however, look for a provider that has made a significant investment in automation and intelligent technologies for processing speed, accuracy and connectivity. An investor portal has become a must-have to satisfy the demand for transparency and instil investor confidence. The provider must be able to provide accounting and reporting across virtually all asset types, including esoteric and hard-to-value assets, and accommodate specialized reporting needs such as ESG (Environmental, Social and Governance).
Beyond technology considerations, look for a provider that brings expertise in accounting, tax and regulatory issues in virtually any jurisdiction around the globe. The provider should be able to demonstrate audited security controls that comply with the highest industry standards for protecting sensitive data and transactions.
ADGM offers numerous advantages to fund managers seeking a foothold in the Middle East. By establishing a strong operational foundation at the outset, new entrants to the market can ensure not only a successful fund launch but sustainable success over the long term.
SS&C in AGDM
For fund managers in ADGM, SS&C offers a full complement of fund administration, operational services and cloud-based technology solutions, delivered by an experienced, on-the-ground team with local knowledge.
SS&C is a leading innovator in technology-powered solutions and operational services for the global investment management industry, with particular expertise in the full range of alternative investments, including hedge funds, private equity, funds of funds, real estate, real assets and direct investments. We are also the industry’s largest global fund administrator, entrusted with $2 trillion in alternatives assets under administration. SS&C serves a worldwide clientele with a network spanning the major financial and commercial centres of North America, Europe, the Middle East, Asia and Australia.
Learn more at ssctech.com
