The United Arab Emirates (UAE) offers an attractive environment for setting up investment funds thanks to its flexible regulatory framework, favorable taxation, and strategic position on the international stage. However, it is essential to understand the different categories of activities as well as the specific conditions for creating an investment fund in the UAE.
1. Regulated and unregulated activities
When creating an investment fund in the UAE, it is crucial to distinguish between regulated and unregulated activities:
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Regulated activities: These activities are subject to strict controls by financial regulatory authorities. They must be carried out through specific structures such as the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM). These jurisdictions offer robust, internationally recognized regulatory frameworks.
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Unregulated activities: These do not require prior authorization from financial authorities. They are ideal for private investments or internal structures that do not solicit public funds.
2. Types of investment funds
In the UAE, you can create different types of investment funds depending on your objectives:
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Traditional Investment Fund: Designed for investments in stocks, bonds, real estate, etc. These funds are often subject to transparency and reporting requirements.
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Cryptocurrency Investment Fund: Increasingly popular, these funds allow investment in digital assets. They may be subject to specific regulatory conditions, particularly regarding compliance with anti-money laundering (AML) and counter-terrorist financing (CFT) regulations.
3. Differences in structures based on investor type and investment nature
The choice of structure also depends on the type of investors (qualified or non-qualified) and the nature as well as the amount of investments:
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Qualified investors: When the fund targets qualified investors (institutional investors, finance professionals), more flexible structures with reduced disclosure requirements can be adopted. The DIFC and ADGM provide specific regulations for these funds, facilitating their management.
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Non-qualified investors: For retail investors, regulatory requirements are stricter to ensure increased protection. This includes enhanced transparency obligations, regular audits, and limits on certain types of high-risk investments.
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Investment amount: Large-scale funds involving significant amounts may require more complex structures and higher levels of control, particularly in terms of governance and risk management.
4. Role of SPVs (special purpose vehicles)
SPVs are legal entities created to isolate financial risks and facilitate the management of specific assets. They are highly useful in structuring investment funds in the UAE, particularly for:
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Asset isolation: Allows separating the fund's assets from those of the parent company to limit risks.
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Tax optimization: Supports tax-efficient strategies depending on jurisdictions.
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Operational flexibility: Facilitates the management of complex projects, especially for real estate investments, mergers and acquisitions, or cryptocurrency portfolios.
SPVs are commonly registered in free zones such as the DIFC and ADGM, offering benefits in terms of regulatory compliance and legal protection.
5. Specific conditions to set up
To create a successful investment fund in the UAE, it is necessary to meet certain conditions:
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Obtaining necessary licenses: For regulated activities, specific licenses must be obtained from DIFC or ADGM authorities.
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Choosing the right legal structure: Selecting the appropriate legal structure (LLC, joint-stock company, SPV, etc.) based on the fund's needs.
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Implementing compliance policies: Ensuring compliance with local and international regulations, particularly regarding financial transparency.
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Appointing licensed fund managers or externalize these functions: The fund must be managed by certified professionals with proven experience in asset management.
Conclusion
Setting up an investment fund in the United Arab Emirates offers numerous opportunities but requires a thorough understanding of local regulations. Whether you want to launch a traditional fund or a cryptocurrency fund, our firm, Meyran Partners, is here to support you through every stage of the creation and management of your investment fund.
