DIFC opens to hedge funds

August 24, 2014 4:45 pm

The Dubai government approves new regulations that will allow global hedge funds to enter Dubai’s International Financial Centre (DIFC).

The changes, which were issued by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, took effect last Thursday, August 21, and allow a new investment category, The Qualified Investment Fund (QIF), to participate in the DIFC.

QIF will be available to professional investors that, by hedging up to 50 people, can collectively accumulate more than $500,000 in a fund.

Furthermore, the new amendments will also aim to improve the structure and process of the Dubai Financial Services Authority (DFSA). Following complaints by investors that the DFSA, the emirate’s financial regulatory body, failed to prevent highly volatile companies from dragging the entire market through its turbulence, the government has seemingly stepped in to empower regulators. Specifically, it will allow the DFSA to suspend licences for up to one year, while banning firms from using misleading names.

“The amendments are a statement of intent that Dubai is serious about competing with major fund domiciles around the world,” says Ben Bruton, managing partner at law firm Eversheds in the UAE.

Interestingly, the new regulations will also confront another issue that Dubai’s financial sector has endured in recent weeks. As AMEinfo reported last Monday (August 18), Tadawul has surged in 16 out of last 18 sessions, reaching a six-year high, since its decision was announced to allow foreign investors to participate on the bourse.

At the same time, Dubai’s Financial Market (DFM) has seen its lowest trade volumes since the beginning of the year, in what appears to be a redirection of capital to the larger and less volatile Saudi bourse.

By opening its market to hedge funds – while also further empowering regulators – the DIFC may well attract much of that investment back.