Our website uses  cookies for statistical purposes.

  • Unit OT 14-44, Level 14, Central Park Offices, Dubai
  • clients(at)dubai-lawyers.net
  • +971 56 979 4813
Our Articles

Open an Investment Fund in Dubai

Open an Investment Fund in Dubai

Entrpreneurs who want to open an investment fund in Dubai enjoy a modern regulatory regime for the types of available funds. The fund regime in Dubai is in line with the existing international standards. The Dubai International Financial Centre (DIFC) is the prime location to base a fund in Dubai. The Dubai Financial Services Authority (DFSA) is the regulating agency of the DIFC and the one that imposes the rules and regulations for investment funds, investment restrictions and transaction requirements.

One of the experts at our law firm in Dubai can give you complete details about the regulatory framework set forth by the Dubai Financial Services Authority.

Types of funds in Dubai

Two types of funds can be set up in the Dubai International Financial Centre: the public fund and the exempt fund. A licensed fund manager or an external fund manager must manage these funds. One of our lawyers in Dubai can tell you more about the licensing requirements for fund managers in Dubai.

The public funds in Dubai are used by retail investors and they observe the international standards for investor protection. These types of funds are subject to extensive disclosure requirements so that investors may make an informed investment decision.

The exempt funds in Dubai are used by professional investors. A minimum investment of USD 50,000 is required for this type of fund. These cannot be traded publicly and have a limit of only 100 unitholders.  As for the special funds in Dubai, these include the following:

  • Islamic funds: set up and managed according to the Shari’a system;
  • hedge funds;
  • property funds;
  • private equity funds;
  • real estate investment trusts (property funds).

You can also count on our  immigration lawyers in Dubai for support in moving here as a businessperson.

We have prepared a video about how to open an investment fund in Dubai

The registration of an investment fund in Dubai

The registration of an investment fund in Dubai starts at the time the owner decides on the management of the fund which can be a partnership, a trust, or a company. The Department of Economic Development is the institution in charge of registering the investment funds through the chosen vehicle if at least 50 investors are part of such funds. Dubai International Financial Center or DIFC is a special economic zone and an international hub preferred for investments by foreign investors. Also, it is good to know that the Dubai Financial Services Authority, or DFSA is the regulatory body for investment funds in Dubai

Documents required to open a fund in Dubai

Setting up a Dubai investment fund requires not only a thorough comprehension of investment techniques but also of the documentation needed for them. In general, partnerships and investment corporations are the two main types of fund structures found in the DIFC and in Dubai. For each business form, the documents required for establishment are different.

For investment companies, the following documents are required:

  • the Memorandum on Private Placement;
  • the Investor Subscription Agreement;
  • the agreement for investment management;
  • the prospectus of the fund.

When created through a Dubai partnership, the following paperwork needs to be drafted:

  • the Private Placement Agreement;
  • the limited partnership agreement;
  • the Investors’ Subscription contract;
  • the contract for investment management.

Our law firm in Dubai can offer more information on the documents required to create a fund in the Emirates. They can also help you open a company in Dubai with the purpose of setting up an investment management firm.

Managing a domestic or an external fund in Dubai

domestic fund opened in Dubai must be created in respect of the Collective Investment Rules and the Collective Investment Law. The manager of a domestic fund needs to consider the financial risks and must ensure complete management in agreement with the constitutive documents of the fund and its operations. As for the external funds established in Dubai, the manager of such funds needs to comply with the conditions in the country of jurisdiction and must inform the DFSA that such investment fund has been established. It is good to know that the external funds can be managed by domestic funds, overseen by DFSA, if such funds are established in DIFC. A DFSA licensed fund manager is appointed for such investment funds in Dubai and he/she will be the connection between the investors and DFSA.

Our immigration lawyers in Dubai can advise on how you can move here and set up an investment fund,

Investment and borrowing restrictions for funds in Dubai

When it comes to stock borrowing or lending, the value of the insurance needs to be the same with the transferred security. It is forbidden to borrow more than 20% of the net asset value of the investment fund. Moreover, a special resolution needs to be created, with the acceptance of the investment holders, in the case of stock lending and borrowing. The fund manager oversees such actions and if certain restrictions need to be imposed, he/she or the company may act so. Feel free to discover the legal aspects of investment funds in Dubai from our lawyers in Dubai.

Open-ended funds in Dubai

Open-ended funds are available in Dubai and refer to the type of investments where foreign investors have the possibility of issuing an unlimited number of shares by investing in stocks and bonds. Such an investment fund can be traded on the local exchange market taking into account the net asset value or NAV as it is called. An open-ended investment fund in Dubai is preferred by many foreign investors because there is no need to place big sums of money for opening such a fund. When deciding on an open-ended investment fund in Dubai, businessmen should pay attention to the investment plan and the ways the financial purposes if such a fund can be achieved. An open-ended investment fund in Dubai is normally established with the help of an appointed portfolio administrator. Among the advantages of such an investment fund is the stability provided to foreign entrepreneurs looking to set up an open-ended investment fund in Dubai. Feel free to get in touch with our team of attorneys and find out more about immigration to Dubai and how you can open an investment fund in Dubai.

Hedge funds in Dubai

If you would like to open a hedge fund in Dubai, you should, first of all, observe the regulations for this type of vehicle. Among these, creating the prospectus with information about the investment plan, the business strategies, the owners, the value of the assets and the ways in which the fund will be administrated is extremely important. A hedge fund is established once a legal entity is registered in Dubai and especially in DIFC. Hedge funds in the UAE are established with a special financial requirement of AED 10 million. A hedge fund needs to be properly promoted in the business area is created and with the help of varied promotion strategies. Foreign investors in Dubai can also solicit the support of wealth management companies in Dubai, which are ready to implement a series of business plans for sustaining and promoting the hedge fund.

Foreign funds in Dubai

There are no restrictions for foreign investors interested in setting up investment funds in Dubai. Overseas funds can also operate in this Emirate. International investment funds must first obtain permission from the Securities and Commodities Authority (SCA).

Following that, they may be marketed in the United Arab Emirates through:

  • a bank licensed by the Central Bank;
  • an investment business approved by a local promoter, such as the Central Bank;
  • a company licensed by the SCA for this purpose.

The foreign fund must meet two requirements before the SCA will approve it:

  • it must be created in a foreign country and be supervised by a body that is the equivalent of the SCA;
  • it must have a license in its home country to promote units for an initial public offering.

The law outlines the following instances in which foreign investment funds are exempt from SCA registration requirements:

  • the foreign fund is only to be marketed to national or local government organizations, or to their fully owned subsidiaries;
  • the investor starts the transaction (reverse solicitation) and the fund manager or any of its representatives do not promote the fund in the United Arab Emirates.

To demonstrate that the investor approached the fund management company in the UAE without the fund manager engaging in any promotional activity, proof needs to be provided.

You can also apply for a Dubai investment visa if you are a foreign entrepreneur interested in creating an investment fund and moving to the UAE. You can rely on our immigration lawyers in Dubai for support during relocation.

Rules and regulations for fund managers in Dubai

Funds set up in Dubai must appoint a fund manager or asset manager. This individual must be licensed by the DFSA. There are two types of fund managers in Dubai:

  • the domestic fund manager: operates in the DIFC and is licensed by the DFSA and offers his financial services for the purpose of managing a collective investment fund;
  • the external fund manager: he is licensed and allowed to establish a domestic fund in Dubai without having a place of business within the DIFC; he must be licensed by a recognized Financial Services Regulator.

A number of fees are applicable to funds and fund managers in Dubai. These apply for a licensing application, the annual license fee, an annual fee per fund, or the public fund registration fee. One of our attorneys in Dubai can give you more information about how these fees apply.

Fund marketing requirements in the UAE

A prospectus containing various disclosures must be followed when marketing domestic funds. When it comes to disclosures, the requirements for public funds accessible to clients and/or 100 or more investors, are stricter than those for exempt funds available to professional investors. The prospectus must be submitted in copy to the DFSA.

Only DFSA-licensed companies are permitted to market foreign funds. Authorized firms must also fulfill additional requirements before they can promote the units of foreign funds.

Short conclusion about investment funds in Dubai

Private equity funds, master funds, property funds, hedge funds, umbrella funds, real estate investment funds, open-ended and close-ended investment funds can be established by foreign entrepreneurs in Dubai, with respect to the regulations of DFSA, DIFC, and the related legislation. A fund manager is a mandatory condition for opening an investment fund, plus the obligation of establishing a legal entity for any kind of investment fund. You may talk to our advisors and find out more details in this sense.

DIFC, home to an increasing number of hedge funds

Dubai International Financial Centre is home to most investment funds in Dubai. According to recent data:

  • in 2023, 10 new hedge funds were registered in the free zone;
  • the same year, the number of hedge fund managers rose by 125%;
  • by 2031, private wealth in the UAE is expected to reach a value of USD 996 billion, while the number of high-net-worth individuals is predicted to grow by 40%.

Our lawyers are also at your service should you want to apply for a freelance visa for Dubai.

For more information about investing in the DIFC and about immigration to Dubai, please contact our law firm in Dubai.