Types of Investment Funds in UAE
The United Arab Emirates (UAE) is one of the top investment destinations in the world. Foreign businessmen interested in how to start a fund in the UAE may choose from numerous investment vehicles, designed to address the needs of various types of investors. Investment funds registered in the UAE can be registered as open-ended or closed-ended vehicles, each category offering different investment advantages.
Main categories of UAE investment funds
Mutual funds in the UAE
One of the ways on how to start an investment fund in UAE is to incorporate it in the Dubai International Financial Centre; this investment destination is suitable for the registration of a mutual fund. 25 mutual funds were registered in UAE in 2016.
Does UAE have a passporting law?
- investment managers that are regulated by one of the three financial institutions will be able to market or sell the investment funds at the level of the entire country;
- the advantage of the law is that the investors based in a financial center of the country will not need further approval from the authority of another UAE financial center;
- the purpose of the new legislation is to stimulate the investment market available in this country;
- the agreement that was signed between the main financial regulators of the UAE regulates onshore investment funds;
- it also has the purpose of improving the licensing procedures necessary for UAE funds.
Why start an open-ended fund in UAE?
An open-ended fund in UAE is characterized by the fact that it can be set up with a variable capital. The open-ended fund is also known as an open-ended mutual fund; this type of vehicle can have its units listed and traded on a given market, but it is necessary to obtain a prior approval for this operation from ESCA.
Those interested in how to start a fund in UAE as an open-ended vehicle will have to obtain a license from ESCA in order to be recognized as a corporate structure in this country. The same applies to a closed-ended fund, the difference being that the structure is registered with a fixed capital.
What are the main documents for starting a UAE fund?
- a completed application form required for the issuance of the license;
- the prospectus and the Key Investor Information Document (KIID);
- information on the selected legal entity for the fund, as well as information on its corporate structure;
- presentation of the legal responsibilities of the applicant and the fund’s internal procedures;
- the fund’s prospectus, its main statutory document, must be written in Arabic and must contain information on all the aspects of the fund.
What does a prospectus contain in UAE?
- the corporate bodies of the fund and its internal structure;
- the selected investment policies and the associated risks with carrying the respective investment scheme;
- the manner in which the assessment of the risks was done;
- the classes of investors who are allowed to invest in the respective fund;
- if the fund will invest in other countries, the investors must also provide information on the tax system applicable in the given jurisdictions;
- the policies established for the distribution of profits, dividends and other types of incomes;
- in the case in which the vehicle operates as an umbrella-fund, the prospectus must also mention details on the policies of such sub-funds.
What is the value of the investment market in Dubai?
- the market expanded until 2014, and the end of which, the financial industry accounted for AED 9,002 million;
- the following year marked a slight decrease, reaching AED 8,534 million;
- at the end of 2017, the Dubai financial market registered revenues with a total value of AED 9,427 million;
- in 2018, the revenues registered at the level of this industry accounted for AED 9,443 million.
- since January 2018, the UAE Stock Market had the highest development at the level of April 2019.
Hedge funds in the UAE
Also, investors must know that regardless of the investment vehicle chosen for incorporation, the fund will need an approval issued by ESCA. Amongst the requirements, investors have to set up a capital of minimum AED 10 million. Foreign investors are invited to contact our team of affiliates in UAE for more details on this subject.