Accessing Capital in the Middle East

In the post-global financial crisis world,
investors are demanding more rigorous regulation to protect their interests.
However, at the same time, investors don’t want regulations that put managers
in a straightjacket or weigh funds down with overly burdensome compliance
requirements or costs. Certain global financial centres are reviewing their
regulations in an attempt to address these issues.

This article identifies the factors that
have propelled the Dubai International Financial Centre to the top of the list
as a domicile of choice for asset managers in the Middle East and Africa and
provides an overview of the application process for establishing an asset
management business in the DIFC. We also take a look at the recent revisions to
the DIFC funds regime which makes it easier for DIFC based asset managers to
establish and market Cayman Islands domiciled funds.

Introduction to the DIFC

The DIFC was established in 2004 to
bridge the gap between the global financial centres of London and Hong Kong. It
is a legally independent financial free zone, located in Dubai, with its own
set of laws and Court system based on the best practices of leading common law
jurisdictions. The DIFC is now home to over 1,000 companies, including some of
the world’s largest asset managers and financial institutions, and can
justifiably be considered as one of the fastest growing global financial

The DIFC has its own independent
regulator, the Dubai Financial Services Authority, which is responsible for the
licensing and supervision of entities seeking to provide financial and
ancillary services in or from the DIFC. An asset manager seeking to conduct
financial services in or from the DIFC must generally be licensed by the DFSA
to do so. While the DFSA provides for five different categories of license, the
most common type of license for asset managers is a Category 3 license, which
permits asset managers to deal with and provide advice in respect of assets, as
well as provide for discretionary management of assets.

Benefits of establishing an asset
management business in the DIFC

The primary reason asset managers
establish a presence in the DIFC is to access the capital available in the
Middle East and Africa region, particularly from sovereign wealth funds and
family offices. Other benefits of setting up in the DIFC include:  

a)  100
per cent foreign ownership of manager entity is permissible 

b)  no
tax on income or profits  

c)  wide
network of double taxation treaties available  

d)  no
restrictions on foreign exchange or capital/profit repatriation  

e)  US
dollar denominated environment  

f)  transparent
operating environment with high standards of rules and regulations  

g)  separate,
international legal framework and courts based on the common law of England and

h)  strict
supervision and enforcement of anti-money laundering laws  

i)  ultra-modern
office accommodation, state-of-the-art technology and sophisticated

Overview of the licence application

The incorporation and authorisation
process for asset managers setting up in the DIFC is process driven and usually
takes about three months from start to finish. Approvals are required from
three separate entities within the DIFC before a new applicant is able to
commence business.

First, the DIFC Authority must approve
in principle the business proposed to be conducted by the applicant. This
involves the submission of a detailed business plan, which must include
detailed financial projections illustrating the viability of the business.
Secondly, the DFSA must authorise the applicant to provide the relevant
financial services required to conduct its business. Thirdly, the registrar of
companies must incorporate and register the applicant as a legal entity.

The following requirements need to be
satisfied by asset managers seeking to undertake financial services in or from
the DIFC:

Physical presence: applicants must have
an operational business and, for this purpose, are required to either own or
lease office space in the DIFC;

Authorised individuals: certain
specified functions must be fulfilled by the applicant’s officers and
employees. The persons nominated to fulfil the functions are required to meet
specific standards relating to their qualifications and experience and, for
certain functions, must be resident in the UAE;

Regulatory capital: depending on the
financial services to be provided, the applicant will be required to maintain a
minimum amount of deposited regulatory capital determined by the DFSA.

minimum capital requirement for a Category 3 license is US$500,000, although
the DFSA usually requires a buffer above this minimum amount.

Recent reforms to the DIFC funds regime

In late 2010, the DFSA made a number of
significant changes to the funds regime with the aim of improving the appeal
and functionality of the DIFC as a domicile of choice for asset managers. A
number of the changes have a particular impact on asset managers looking to
establish and market Cayman Islands domiciled funds.

Establishing and managing Cayman Islands

Prior to the recent amendments, a DFSA
licensed asset manager was not able to sponsor or establish a foreign fund (any
fund not domiciled in the DIFC); although it was permitted to act as investment
manager to such fund. This restriction has now been removed and asset managers
are able to establish Cayman Islands domiciled funds. While Cayman Islands
funds will not be regulated by the DFSA, the DFSA licensed asset manager must
comply with certain minimal requirements including: 

a)  ensuring it has
systems and controls adequate to ensure compliance with the requirements
applicable to the fund in the jurisdiction it is domiciled – effectively,
complying with the requirements of Cayman Islands law already incumbent on the

b)  providing
notification to the DFSA of the establishment of the Fund; and 

c)  ensuring the
offering document for the fund contains a prescribed statement that the fund is
not subject to regulation by the DFSA. 

Marketing of Cayman Islands funds 

In addition to the above, the ability
for a DFSA licensed asset manager to market and distribute Cayman Islands funds
has been expanded. Previously, Cayman Islands funds could only be marketed in
or from the DIFC where the custodian and investment manager of such fund were
both regulated by a financial services regulator in a jurisdiction recognised
by the DFSA – the list of recognised jurisdictions includes the US, UK,
European member states, Singapore, Hong Kong and Australia. 

The new regime expands the ability to
market and distribute Cayman Islands funds and allows a DFSA licensed asset
manager to undertake such activities (in addition to the above) where either of
the following criteria are met: 

  • the manager makes a suitability
    recommendation of investing in the fund to the investor in light of the
    investor’s investment objectives and circumstances;  
  • the fund is open to 100 or fewer
    investors, each of whom fall within the definition of a ‘professional client’,
    has a minimum subscription of US$50,000 and is not offered to investors by way
    of public offer. 


With the global depletion of available
capital as a consequence of the global financial crisis, asset managers are
increasingly looking to access the significant amount of available capital in
the Middle East and Africa. To be successful at gaining access to such capital,
asset managers must select an appropriate financial centre for their management
operations. In addition to tax and infrastructure benefits, it is more
important than ever to ensure that the jurisdiction chosen by asset managers is
seen to operate to the highest international standards. The DIFC, through its
regulator the DFSA, has positioned itself to attract such business.  

The recent
changes to the regulatory environment discussed above demonstrate the
willingness of the DFSA to work with managers to create and maintain a
financial centre operating at the highest of international standards. As the
leading offshore legal services provider, Walkers, through its office in the
DIFC, has assisted some of the world’s premier asset managers to take advantage
of the DIFC’s attractive combination of location, regulation and commercial

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Tim Buckley

Tim Buckley specialises in investment funds, in particular hedge funds and private equity funds, as well as finance matters, advising many of the world’s leading asset managers and banks.  Tim also has extensive corporate, asset and leverage finance experience as well as both public and private securities offerings of both debt, equity and hybrid products. Tim services some of the firm’s most significant clients, including global asset managers, banking institutions and Sovereign Wealth Funds. He has also advised on some of the largest global corporate, investment fund and financial institution transactions and restructurings.​

Tim Buckley

Managing Partner
190 Elgin Avenue
George Town
Grand Cayman KY1-9001
Cayman Islands

T: +971 4 363 7908
E: [email protected]

Daniel Wood

Daniel advises on corporate matters, with a focus on investment funds of all types and structured finance. Daniel has bachelors degrees in Commerce and Law from the University of Western Australia. 

Daniel Wood
Senior Associate
5th Floor, The Exchange Building
PO Box 506513, DIFC
United Arab Emirates

T: +971 4 363 7912
M: +971 50 652 5633
E: [email protected] 

Walkers Global

Walkers' Cayman Islands office was opened in January 1964 and is consistently ranked in the number one tier of Cayman based law firms by all leading legal directories and periodicals. Our Cayman office attracts leading international financial and corporate clients, including major financial institutions, investment banks, arrangers, promoters and managers, leading law firms, accounting firms, major corporations of all kinds, partnerships, trust companies and other fiduciaries.

Our extensive team of lawyers and support staff focus principally on corporate and international finance law, with an emphasis on investment funds, capital markets and structured finance. Our Cayman office has an international reputation as having the leading hedge fund and private equity funds practices in the Cayman Islands, advising the best-known asset managers, promoters and institutional investors in the investment world for more than four decades.


Walker House
190 Elgin Avenue
George Town
Grand Cayman
Cayman Islands

T +1 345 949 0100
F +1 345 949 7886
E: [email protected]