With the Capital of the UAE developing an international financial center and free trade zone (“FTZ”) called Abu Dhabi Global Market (“ADGM”) in recent years, it is perhaps not surprising to see Abu Dhabi become an increasingly preferred jurisdiction for investment. ADGM has quickly emerged as a diversified financial services hub for local, regional and international institutions, and a place in which companies can conduct business in the UAE with confidence and ease.
In our first blog in this series, we considered why asset managers are rethinking historical jurisdictions for cross-border investment arrangements, particularly in light of the changing tax environment and in anticipation of government measures in response to COVID-19. In this second blog, we will look at why Abu Dhabi is a top jurisdiction for investment as organizations transform for the new reality ahead.
The global asset managers that we work with tell us that ADGM has created a very attractive regulatory, legal and tax environment. In particular, ADGM has put into place legal and regulatory frameworks that bring features specifically designed for asset management and that permit the formation of common cross-border structures. Fund managers located both within and outside ADGM are permitted to establish ADGM entities. These include:
In addition, fund managers can establish many different types of funds in ADGM, including:
Such funds are subject to differing levels of regulation and investor protection depending on whether they are retail focused and made available by public offering, or whether they are available only to professional and targeted clients by private placement.
Beyond asset management, ADGM offers licenses to financial service providers, as well as other businesses including professional, commercial, construction, family office and entrepreneurial ventures. ADGM creates its own regulations and has established a Registration Authority (“Registrar”), Financial Services Regulatory Authority (“FSRA”), the ADGM Courts, and an Arbitration Centre to enforce these rules. The result is that ADGM provides a sophisticated and flexible regime attractive to both asset management and other businesses, contributing to an attractive commercial ecosystem in Abu Dhabi.
There are several other features that are drawing investors to ADGM, including:
Clients who are pivoting to ADGM entities tell us that the ADGM framework balances a business-friendly environment for industry practitioners, while retaining appropriate levels of investor protection. For investors and asset managers either with existing operations in the region, or looking to establish an office or expand in the Middle East, the combination of ADGM‘s stable and sophisticated legal structure and access to tax treaties make ADGM an attractive option for legal entity structuring.
Of course, there are other jurisdictions that are gaining popularity amongst asset managers and investors during this time, and we’ll cover another jurisdiction in the next article in this series. We welcome your questions and feedback on this overview in the meantime.