CORPORATE SERVICES

Investment Funds In ADGM

Wincore Advisory Group’s structuring team will advise you on the best structuring to establish your Investment Funds in the ADGM, whilst assisting you in fulfilling all regulatory licensing with ROC (Registrar of Companies), DED (Department of Economic Development), Freezone authority and the Regulatory authorities.

With a number of different options for establishing different types of investment funds in the United Arab Emirates (UAE), the Abu Dhabi Global Market (ADGM) remains a top jurisdiction of choice for the set up of a variety of Investment Funds.

The ADGM has a Regulatory regime for Funds and has been designed to meet international standards for regulation and, where required, to provide adequate investor protection.

The ADGM as a premium International Financial Free Zone has an independent risk-based regulator, the Financial Services Regulatory Authority (FSRA), which provides a facilitative, business-friendly regulatory framework while remaining compliant with the International Organisation of Securities Commission’s (IOSCO) principles for regulating Funds.

Why is the ADGM the top jurisdiction of choice to set up an Investment Fund?

The ADGM is one of the two Financial Free Zones within the UAE with its own civil and commercial laws. At the heart of the ADGM model is an independent risk-based regulator, the Financial Services Regulatory Authority (FSRA), which grants licenses and regulates the activities of all banking and financial institutions in ADGM. As a financial free zone with an independent jurisdiction, ADGM has three independent authorities:

Financial Services Regulatory Authority (FSRA);
Abu Dhabi Global Market Registration Authority (ADGM RA) and;
ADGM Courts operating under English common law;

These three authorities ensure that ADGM offers a highly professional yet business-friendly environment operating with the best practices and recognized by all the major financial centers across the world.

The ADGM Regulatory regime for Funds has been designed to meet international standards for regulation and, where required, to provide adequate investor protection.

The FSRA has provided a facilitative, business-friendly regulatory framework while remaining compliant with the International Organisation of Securities Commission’s (IOSCO) principles for regulating Funds.

Wincore provides strategic assistance and coordination services on establishing investment funds in the DIFC. Our team of senior-level compliance and legal advisors, combined with sophisticated corporate service expertise, can provide the highest quality advisory and set up services for regulated and unregulated set-ups, at a competitive cost and within an efficient and respected processing timeline.

What is the ADGM Regulatory Regime for Investment Funds

A Public Fund regime, which provides greater protection to retail investors through requirements such as the independent oversight of a fund and detailed disclosure in a Prospectus;
An Exempt Fund regime where Funds enjoy a fast-track notification process, where the FSRA aims to complete the process within a period of five business days, with lesser regulatory requirements than a Public Fund;
A Qualified Investor Fund (QIF) regime, which provides proportionate regulation, allowing flexibility for QIF managers and QIFs, by relying on key requirements in the Collective Investment Law and the DFSA Rulebook. The regime requires self-certification regarding the adequacy of systems and controls. QIFs enjoy a fast-track notification process where the FSRA aims to complete the process within a period of two business days;
FSRA-licensed (i.e. ADGM-based) Fund Managers are able to establish and manage funds in the ADGM, as well as in jurisdictions outside the ADGM;
Fund Managers coming from acceptable jurisdictions are able to establish and manage funds in the ADGM under certain circumstances;
FSRA-licensed firms are allowed to market and sell units in a wide range of foreign funds in, or from, the ADGM;
A competitive fee structure is applied to Fund Managers and funds;
Fund Managers of Umbrella Funds have the flexibility to use the Protected Cell Company (PCC) structure for open-ended Umbrella Funds. This gives investors in each Sub-Fund of the Umbrella legal segregation from liabilities arising in other Sub Funds and the Umbrella;
Bespoke Shari’a governance requirements applying to Islamic Funds, which promote high Shari’a governance standards with the flexibility of application;
Bespoke regulatory requirements to accommodate specialist funds, such as Private Equity, Property and Hedge Funds1; and
The FSRA also regulates the key players in the fund management service sector, such as fund administrators, custody providers and trustees. This is to ensure adequate investor protection by promoting high industry standards that meet international best practices.
ADGM Funds can be managed by either an FSRA-licensed or an External Fund Manager.

What are the types of Investment Funds in ADGM

Funds	Minimum Subscription	Maximum Unit Holders	Regulatory Levels	Offer
Public Funds (PF) Fund available to retail clients.	No Minimum	No Maximum	Higher regulatory requirements.	Units Offered to the general public.
Exempt Funds (EF) Fund only available to professional clients.	$50,000	100	Slightly less Stringent than PF.	Units Offered to persons by way of private placement.
Qualified Investor Funds (QIF) Fund only available to professional clients.	$500,0000	50	Significantly less stringent than PF & EF.	Units Offered to persons by way of private placement.

Other Types of Funds in ADGM

Special Funds
- Shari’a-compliant Funds / Islamic Funds require a fund manager to be authorized by the DFSA to carry out Islamic Financial business and must appoint a Shari’a supervisory board to the Fund; Have Shari’a-compliant systems and controls; Maintain Islamic business policies and procedures manuals; and obtain approvals from the Shari’a Supervisory board, for the relevant fund documents.

Hedge Funds are also a type of investment fund which invests their clients’ money in alternative investments to beat the market or hedge against market uncertainties as risk management measures.
- Private Equity Funds are basically collective investment schemes used for making investments in various securities. In the DIFC, Private Equity Funds are closed-ended. A private equity fund makes investments in the equity and debt of privately-held companies (sometimes listed entities as well), focusing on the long-term potential of the acquisition, much like private-equity firms. In the DIFC, Private Equity Funds are closed-ended and open to only Professional Investors. In DIFC Private Equity Funds can be either an Exempt Fund or a Qualified Investor Fund

Venture Capital Funds come into the picture when wealthy individuals make an investment in potential startups for long-term future growth of their capital. The Venture Capital-stage of the investment cycle of a startup comes before a Private Equity-stage, and hence these investments are characterized by smaller ticket sizes and higher risks. In the DIFC, Venture Capital Funds are closed-ended and open to only Professional Investors. A DIFC Venture Capital Fund can be either an Exempt Fund or a Qualified Investor Fund.

Property funds are investments in a commercial property e.g. offices, factories and warehouses.A Property Fund which is a Public Fund must invest only in Real Property or Property Related Assets, but may retain up to 40% of its investments in cash or certain specified Securities; Be an Investment Company or Investment Trust; Be listed, within six months of its establishment, either on an Authorised Market Institution or an Exchange in a Recognised Jurisdiction; Have the Fund property valued annually; Value the Fund property on the basis of an independent valuation of the relevant property, before acquiring or disposing of any asset; and Limit its borrowing to 80% of its total net asset value

- Property Funds – Real Estate Investment Trusts (REITs) REITs are a sub-set of Property Funds, which are designed for income generation. A REIT must, in addition to being closed-ended: Use only Investment Company or Investment Trust as the fund vehicle; Be a Public Fund that is listed and traded on an Authorised Market Institution; Distribute 80% of its audited annual net income to Unitholders; Not borrow beyond 70% of net asset value, and Invest only up to 30% of its total assets in ‘property under development.