{"id":148042,"date":"2026-09-08T08:53:12","date_gmt":"2026-09-08T08:53:12","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=148042"},"modified":"2026-09-08T08:53:12","modified_gmt":"2026-09-08T08:53:12","slug":"uae-alternative-investment-funds","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/uae-alternative-investment-funds\/","title":{"rendered":"United Arab Emirates: Alternative Investment Funds"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-148042","comparative_guide","type-comparative_guide","status-publish","hentry","guides-alternative-investment-funds","jurisdictions-uae"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">M&amp;Co Legal<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/08\/MCo-Logo.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">M&amp;Co Legal<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/08\/MCo-Logo.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Alternative Investment Funds laws and regulations applicable in United Arab Emirates<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal legal structures used for Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>DIFC: <\/strong>Funds are established as investment companies (open- or closed-ended) under the DIFC Companies Law, investment partnerships (limited partnerships) or investment trusts. Protected cell companies (PCCs) and incorporated cell companies (ICCs) are available for umbrella and multi-strategy platforms. Regulatory categories cut across legal form: Public Funds, Exempt Funds and Qualified Investor Funds (QIFs).<\/p>\n<p><strong>ADGM: <\/strong>The same menu applies \u2013 investment companies, limited partnerships under the ADGM Limited Partnership Regulations, investment trusts, and PCC\/ICC cell structures \u2013 with the same Public\/Exempt\/QIF regulatory classification under the Financial Services and Markets Regulations 2015 (FSMR) and the FSRA FUNDS Rulebook.<\/p>\n<p><strong>Onshore UAE: <\/strong>Local funds are established under the CMA (formerly SCA) investment funds regime, principally Chairman Decision No 1\/RM of 2023, typically as contractual\/unit-based vehicles sponsored by a licensed management company. The 2023 overhaul introduced a broader range of structures, including private funds, public funds, umbrella\/sub-fund arrangements, feeder funds, self-managed private funds and specialised categories (eg real estate investment trusts (REITs), venture capital funds, exchange-traded funds (ETFs)).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a structure provide limited liability to the investors? If so, how is this achieved?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, in all three jurisdictions. Investment companies have separate legal personality, so shareholder liability is limited to unpaid amounts on shares. In DIFC and ADGM limited partnerships, limited partners enjoy limited liability provided they do not take part in management; both regimes contain statutory \u2018safe harbour\u2019 lists of permitted activities (eg serving on advisory committees, voting on fundamental matters) that do not forfeit limited liability. In investment trusts, investors&#8217; exposure is limited to their contributed trust property. Cell companies additionally ring-fence the assets and liabilities of each cell from other cells. Onshore, unitholders in CMA-regulated funds are liable only to the extent of their subscription.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a market preference and\/or most preferred structure? Does it depend on asset class or investment strategy?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For alternative strategies the clear market preference is a DIFC or ADGM QIF (or Exempt Fund), reflecting speed to market (notification-based establishment), light-touch regulation and familiarity for international investors. Closed-ended limited partnerships or investment companies are preferred for private equity, venture capital, real estate and private credit; open-ended investment companies for hedge strategies. Anecdotally, the DIFC has attracted the larger hedge fund community while the ADGM has been particularly popular for venture capital and digital-asset strategies, though both centres now host the full range. Onshore CMA funds are used mainly for retail-oriented products, REITs and strategies targeting mainland distribution rather than international alternative capital.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the regulatory regime distinguish between open-ended and closed-ended Alternative Investment Funds (or otherwise differentiate between different types of funds or strategies (e.g. private equity vs. hedge)) and, if so, how?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. All three regimes distinguish open-ended from closed-ended funds, and the DIFC and ADGM additionally apply \u2018specialist class\u2019 requirements by strategy \u2013 eg hedge funds, private equity funds, credit funds, property funds\/REITs, money market funds, venture capital funds \u2013 layering strategy-specific rules (such as the requirement for credit funds and publicly-offered property funds to be closed-ended, and REIT distribution and leverage requirements) on top of the Public\/Exempt\/QIF classification. The DFSA&#8217;s Consultation Paper 173 (July 2026) proposes to significantly reduce these prescriptive specialist-class requirements for professional-investor funds in favour of a disclosure-led approach; this remains a proposal at the time of writing. Onshore, the 2023 regulations distinguish public from private funds, open- from closed-ended funds, and prescribe additional rules for specialised categories.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any limits on the manager\u2019s ability to restrict redemptions? What factors determine the degree of liquidity that a manager offers investors of an Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For Exempt Funds and QIFs in the DIFC and ADGM, redemption terms are largely a matter of contract, subject to the manager&#8217;s overarching duties and to liquidity risk management obligations for open-ended funds (aligned with International Organization of Securities Commissions (IOSCO) standards, requiring consistency between redemption terms and asset liquidity). Public Funds face stricter requirements: redemptions at net asset value (NAV) in accordance with the constitution and prospectus, with suspensions permitted only in unitholders&#8217; interests and subject to regulator notification. Onshore public funds are subject to comparable CMA requirements on dealing frequency and suspension. In practice liquidity terms are driven by asset-class liquidity, valuation frequency, investor expectations and financing arrangements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are potential tools that a manager may use to manage illiquidity risks regarding the portfolio of its Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Commonly used tools \u2013 all generally permissible in the DIFC and ADGM if properly disclosed in the fund documents \u2013 include lock-up periods, notice periods, redemption gates (fund- and investor-level), deferred redemptions, side pockets for illiquid positions, redemptions in kind, suspension of dealings, swing pricing\/anti-dilution levies, borrowing to fund redemptions, and slow-pay\/holdback mechanics on full redemptions. Open-ended funds in both centres are expected to maintain documented liquidity risk management frameworks and stress testing.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on transfers of investors\u2019 interests?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Interests in Exempt Funds and QIFs (DIFC\/ADGM) and onshore private funds may only be transferred to persons who themselves satisfy the applicable investor-qualification and minimum-subscription criteria, and fund documents almost invariably impose manager\/GP consent requirements, rights of first refusal and restrictions designed to preserve regulatory, tax and sanctions compliance. Units in public\/listed funds are generally freely transferable. Transfers may also be restricted to preserve the fund&#8217;s tax status (eg the diversity-of-ownership condition for UAE corporate tax exemption \u2013 see 1.9).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any other limitations on a manager\u2019s ability to manage its funds (e.g., diversification requirements)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>QIFs and Exempt Funds have minimal prescriptive investment restrictions; limitations are primarily contractual (concentration limits, leverage caps and investment restrictions negotiated with investors). Public Funds in all three jurisdictions are subject to prescriptive diversification, concentration, borrowing and eligible-asset rules. Specialist classes carry additional constraints \u2013 for example, DIFC and ADGM REITs must distribute at least 80% of audited annual net income and are subject to leverage caps and development-activity limits, and money market funds face portfolio-quality and maturity rules. Managers are also constrained by their licence scope, conduct-of-business rules, conflicts requirements and anti-money laundering (AML) obligations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the local tax treatment of (a) resident, (b) non-resident, (c) pension fund and (d) sovereign wealth fund investors (or any other common investor type) in Alternative Investment Funds? Does the tax status or preference of investors or the tax treatment of the target investments primarily dictate the structure of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The UAE imposes no personal income tax and no withholding tax (the domestic withholding rate is 0%). Federal corporate tax (\u2018CT\u2019) of 9% has applied since June 2023 under Federal Decree-Law No 47 of 2022, but the funds ecosystem is designed to be tax-neutral: a fund regulated by the CMA, DFSA or FSRA may qualify as a tax-exempt Qualifying Investment Fund (\u2018QIF\u2019) under Article 10 of the CT Law and Cabinet Decision No 34 of 2025 (which replaced Cabinet Decision No 81 of 2023 with effect for tax periods from 1 January 2025), subject to conditions including diversity of ownership and a 10% cap on UAE immovable-property exposure. The 2025 decision also created an exemption for Qualifying Limited Partnerships (QLPs). Investors in an exempt QIF exclude distributions from taxable income; taxation can arise for juridical investors mainly where the fund breaches the ownership-diversity condition or exceeds the real-estate threshold, and Cabinet Decision No 35 of 2025 sets out when a non-resident juridical investor acquires a UAE tax nexus through such investments.<\/p>\n<p>(a) UAE-resident corporate investors are within the CT regime but benefit from the QIF distribution exclusion and, where applicable, the participation exemption; resident individuals investing personally are generally outside CT. (b) Non-residents are generally not taxed absent a UAE nexus. (c)\/(d) UAE public pension funds, government entities and qualifying sovereign wealth vehicles benefit from their own CT exemptions; foreign pension funds and sovereign wealth funds (SWFs) are typically not subject to UAE tax on fund returns. VAT at 5% can apply to management fees depending on the recipient&#8217;s location. In practice, structuring is driven more by investor familiarity, Sharia requirements and regulatory access than by UAE tax, although the QIF\/QLP conditions increasingly inform structuring choices. Tax treatment should always be confirmed with UAE tax counsel on current guidance.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rights do investors typically have and what restrictions are investors typically subject to with respect to the management or operations of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Consistent with international practice, investors are passive: they do not participate in day-to-day management (and limited partners must avoid doing so to preserve limited liability), but typically hold rights to vote on fundamental changes (amendments to constitutional documents, changes to investment policy, extension of term), rights to remove the manager\/general partner (GP) (for cause, and often no-fault removal by supermajority in closed-ended funds), representation on limited partner advisory committees (LPACs) (conflicts, valuations, key-person events), information and reporting rights, and key-person and cause-based suspension protections. Restrictions commonly include transfer restrictions, confidentiality, default remedies on failure to fund capital calls, and excuse\/exclusion mechanics.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Where customization of Alternative Investment Funds is required by investors, what types of legal structures are most commonly used?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Funds-of-one and single-investor QIFs, separately managed accounts, co-investment vehicles and parallel funds are all common. The DIFC and ADGM cell regimes (PCC\/ICC) are widely used to create bespoke cells for individual investors or strategies on a single platform, and both centres offer flexible special purpose vehicle (SPV) regimes (including the ADGM&#8217;s widely used SPV framework and DIFC prescribed companies) for holding structures, feeders for Sharia-compliant or tax-sensitive investors, and blocker vehicles.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are managers or advisers to Alternative Investment Funds required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes in all three jurisdictions. In the DIFC, managing a collective investment fund is a Financial Service requiring DFSA authorisation (typically a Category 3C licence); advising and arranging are separately regulated activities. The ADGM position mirrors this under FSMR, with FSRA Financial Services Permissions for Managing a Collective Investment Fund and\/or Managing Assets. Onshore, fund management, promotion and related activities require a licence from the CMA (formerly SCA), and 100% foreign ownership of onshore fund management companies is now permitted. \u2018Regulatory hosting\u2019\/fund platform arrangements are an established route in both financial free zones for managers not wishing to hold their own licence.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are Alternative Investment Funds themselves required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>DIFC<\/strong>: Public Funds must be registered with the DFSA; Exempt Funds and QIFs are established by notification, with the DFSA aiming to process Exempt Fund notifications within five business days and QIF notifications in as little as two.<\/p>\n<p><strong>ADGM<\/strong>: the same three-tier approach applies, with Exempt Funds and QIFs established by notification to the FSRA under section 112 FSMR and Public Funds requiring registration. Onshore: local funds require CMA licensing\/approval, with a lighter-touch regime for private funds than for public funds. Foreign funds promoted onshore must be registered with the CMA (see section 4).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the Alternative Investment Fund require a manager or advisor to be domiciled in the same jurisdiction as the Alternative Investment Fund itself?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Not necessarily. DIFC domestic funds must be managed either by a DFSA-licensed fund manager or by an \u2018External Fund Manager\u2019 \u2013 a foreign manager from a Recognised Jurisdiction that subjects itself to the DFSA regime and appoints a DFSA-licensed fund administrator or trustee in the DIFC as its agent (External Fund Managers cannot manage credit funds or crypto-token funds). The ADGM has an equivalent Foreign Fund Manager regime. Onshore local funds must be managed by a CMA-licensed management company, although delegation of portfolio management to foreign sub-managers is possible with regulatory approval. Conversely, DIFC\/ADGM managers may manage foreign (eg Cayman) funds from the centres, which is a very common model.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there local residence or other local qualification or substance requirements for the Alternative Investment Fund and\/or the manager and\/or the advisor to the fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Licensed managers in the DIFC and ADGM must maintain a physical presence in the centre and appoint mandatory officers \u2013 a Senior Executive Officer (SEO) ordinarily resident in the UAE, a Compliance Officer (CO) and a Money Laundering Reporting Officer (MLRO) (UAE-resident; the CO\/MLRO roles may often be combined or outsourced subject to conditions) \u2013 together with adequate systems, controls and financial resources. Onshore management companies must satisfy CMA capitalisation, staffing and fit-and-proper requirements. The former Economic Substance Regulations were repealed for financial years ending after 31 December 2022, substance now being addressed through the corporate tax framework and regulatory requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What service providers are required by applicable law and regulation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>All funds require an auditor. In the DIFC and ADGM, open-ended and Public Funds must appoint an eligible custodian for fund property (with limited alternatives for certain closed-ended\/private-equity structures where assets are registered appropriately and disclosed), and Public Funds require independent oversight (an oversight committee, or a trustee for investment trusts) and typically a fund administrator; QIFs enjoy significant flexibility, with self-custody and self-administration possible subject to disclosure and systems requirements. Where an External\/Foreign Fund Manager is used, a locally licensed administrator or trustee must be appointed as agent. Onshore funds require a licensed management company, custodian and administrative services provider, plus a Sharia supervisory committee for Islamic funds.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are local resident directors \/ trustees required?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no general requirement for fund-level directors to be UAE-resident in the DIFC or ADGM for Exempt Funds or QIFs. The substance sits at the manager level (resident SEO and MLRO \u2013 see 2.4). Public Funds structured as investment companies require independent oversight arrangements, and investment trusts require a DFSA\/FSRA-licensed trustee. Onshore funds operate through the licensed management company rather than a resident board, with CMA approval of key persons.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to foreign managers or advisers wishing to manage, advise, or otherwise operate funds domiciled in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Foreign managers may (i) obtain their own DFSA\/FSRA licence; (ii) use the External Fund Manager (DIFC) or Foreign Fund Manager (ADGM) regimes described in 2.3, available to managers regulated in Recognised Jurisdictions; or (iii) operate through a regulatory-hosting platform in either centre. Cross-border management or advice provided into the centres without a licence is restricted by the financial services prohibition in each centre, subject to limited carve-outs. Onshore, a foreign manager cannot manage a CMA-licensed local fund without an onshore licence, though it may act as delegate sub-manager with approval; foreign funds themselves may only be promoted onshore as described in section 4.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the common enforcement risks that managers face with respect to the management of their Alternative Investment Funds?\u00a0<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The most active areas are: unlicensed financial promotion or carrying on regulated activities without authorisation (a particular onshore risk given the broad definition of promotion); AML\/counter-terrorist financing (CTF) systems-and-controls failures, which have generated the largest DFSA and FSRA fines in recent years; client classification and suitability failures; misleading marketing materials and disclosure deficiencies; breaches of licence conditions and prudential requirements; conflicts of interest and related-party transaction failures; and market conduct issues. The new federal CMA framework in force from 1 January 2026 materially strengthens onshore investigative and sanctioning powers, and all three regulators have shown increasing willingness to take public enforcement action.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the typical level of management fee paid? Does it vary by asset type?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Fee levels are unregulated (disclosure-driven) and track international norms rather than any UAE-specific standard. As indicative market ranges, which vary by manager, size and vintage and should not be treated as fixed. Hedge strategies typically charge around 1\u20132% of NAV; private equity and venture capital around 1.5\u20132% on commitments during the investment period, stepping down thereafter; private credit and real estate commonly around 1\u20131.5%. Larger institutional mandates and funds-of-one are frequently priced below these levels.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is a performance fee or carried interest typical? If so, does it commonly include a \u201chigh water mark\u201d, \u201churdle\u201d, \u201cwater-fall\u201d, \u201cpreferred return\u201d or other condition? If so, please explain.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Hedge funds typically charge a performance fee of up to 20% of gains, virtually always subject to a high-water mark and sometimes a hurdle. Closed-ended funds typically provide 20% carried interest over an 8% preferred return with GP catch-up, and clawback protection supported by escrow or guarantees. Both European (whole-of-fund) and American (deal-by-deal) waterfalls are seen; regional institutional investors (notably sovereign investors) generally press for whole-of-fund waterfalls, which are the more common regional outcome. These are contractual matters; none of the three regimes prescribes performance-fee mechanics for professional-investor funds.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are fee discounts \/ fee rebates or other economic benefits for initial investors typical in raising assets for new fund launches?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Founder or early-bird share classes with discounted management and\/or performance fees, first-close discounts, and enhanced terms for anchor investors (including capacity rights and, for significant anchors, revenue-share or equity participation in the manager) are standard features of regional launches, implemented through share classes or side letters and subject to fair-treatment and disclosure principles.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are management fee \u201cbreak-points\u201d offered based on investment size?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Tiered fee scales by commitment size, implemented via share classes or side letters, are common, particularly for sovereign and other large institutional investors, and aggregation of affiliated or related accounts for break-point purposes is frequently negotiated.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are first loss programs used as a source of capital (i.e., a managed account into which the manager contributes approximately 10-20% of the account balance and the remainder is furnished by the investor)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>First-loss arrangements are not a common feature of the UAE market. Where they occur, they typically involve emerging hedge managers accessing international first-loss platforms rather than locally sponsored programmes; we are not aware of any regulatory prohibition, but such arrangements would need careful structuring and disclosure.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the typical terms of a seeding \/ acceleration program?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Seed and acceleration capital is a notable regional theme, with UAE sovereign-linked platforms and family offices active as seeders (several government-backed initiatives have been used to attract managers to the DIFC and ADGM). Typical terms follow global practice: sizeable day-one commitments with a two-to-three-year lock-up, in exchange for reduced fees, a revenue share commonly in the range of 10\u201325% of fee income (or an equity stake in the manager), capacity rights and most favoured nation (MFN) protection. Precise terms are bespoke and confidential; the ranges above are indicative market practice only.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What industry trends have recently developed regarding management fees and incentive\/performance fees or carried interest? In particular, are there industry norms between primary funds and secondary funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Trends mirror global developments: continued fee pressure and greater fee customisation; fee-free or reduced-fee co-investment as an expected feature for large limited partners (LPs); management fees charged on invested capital rather than commitments in credit and some private equity strategies; tiered\/ratcheted carry; and increased scrutiny of fee and expense allocation. In secondaries and continuation vehicles \u2013 a growing regional theme \u2013 management fees are typically charged on NAV or invested capital rather than commitments and are generally lower than primary-fund fees, with tiered carry linked to return multiples increasingly common. Retailisation\/semi-liquid evergreen structures with distinct fee models are beginning to appear in the region as well.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What restrictions are there on marketing Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Onshore UAE: <\/strong>Promotion of funds is a licensed activity. Following the January 2023 SCA reforms (Decisions 2\/RM, 3\/RM and 4\/RM of 2023, now administered by the CMA), foreign funds may no longer be offered to the public or to retail investors onshore at all; they may only be promoted on a private placement basis to Professional Investors and\/or Market Counterparties, after registration of the fund with the regulator and through a locally licensed promoter. The previous \u2018professional investor exemption\u2019 from registration no longer applies to foreign funds. Reverse solicitation is recognised but construed narrowly.<\/p>\n<p><strong>DIFC\/ADGM: <\/strong>Units may be offered in or from each centre only in accordance with the Collective Investment Law\/Collective Investment Rules (CIR) (DIFC) and FSMR\/FUNDS (ADGM): domestic Public Funds may be offered publicly, while Exempt Funds and QIFs may be offered only by private placement to Professional Clients meeting minimum subscriptions. Foreign funds may be marketed in the centres by appropriately licensed firms provided the fund meets prescribed criteria (with stricter designation requirements where retail clients are involved).<\/p>\n<p><strong>Passporting: <\/strong>A tri-party passporting regime between the CMA, DFSA and FSRA allows funds domiciled in any of the three jurisdictions to be promoted across the UAE upon a notification\/registration process, which has become the principal route to mainland investors for DIFC and ADGM funds.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the concept of \u201cpre-marketing\u201d (or equivalent) recognised in your jurisdiction? If so, how has it been defined (by law and\/or practice)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. UAE jurisdiction has a codified EU-style pre-marketing regime. Onshore, \u2018promotion\u2019 is defined broadly and can capture early-stage communications, so draft-document soft-marketing carries real licensing risk and is generally conducted, if at all, within the narrow confines of reverse solicitation or through licensed intermediaries. In the DIFC and ADGM the analysis turns on whether a communication amounts to an \u2018offer\u2019 or a financial promotion; preliminary discussions with Professional Clients that do not invite subscription are commonly relied upon in practice, but this is a matter of interpretation rather than defined safe harbour, and care is required.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can Alternative Investment Funds be marketed to retail investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Only through regulated retail structures. Onshore, local public funds may be offered to retail investors, but foreign funds cannot be marketed to retail at all since the 2023 reforms. DIFC and ADGM Public Funds may be offered to retail clients (by firms licensed to deal with retail), and public funds from any of the three jurisdictions may reach retail investors elsewhere in the UAE via the passporting regime (a passported public fund promoted onshore must appoint a locally licensed custodian). Exempt Funds and QIFs are restricted to Professional Clients.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does your jurisdiction have a particular form of Alternative Investment Fund be that can be marketed to retail investors (e.g. a Long-Term Investment Fund or Non-UCITS Retail Scheme)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no direct LTIF\/NURS equivalent. The functional analogue is the Public Fund regime in each of the DIFC and ADGM and the onshore public fund regime, each imposing enhanced disclosure, oversight and investment restrictions. Listed REITs and ETFs are the most common retail-facing alternative products across all three jurisdictions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the minimum investor qualification requirements for an Alternative Investment Fund? Does this vary by asset class (e.g. hedge vs. private equity)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>DIFC and ADGM thresholds are aligned: Exempt Funds require investors to be Professional Clients with a minimum subscription of US$50,000; QIFs require Professional Clients with a minimum subscription of US$500,000 (with limited exceptions for assessed investors and management\/employee participation); Public Funds have no minimum. Onshore, private placements are restricted to Professional Investors\/Market Counterparties as defined in the CMA rulebook, and minimum-subscription conditions apply to registered foreign funds (commonly cited at AED 500,000, though the applicable conditions should be confirmed with the CMA on a case-by-case basis). The thresholds do not vary by asset class, although strategy-specific rules (eg crypto funds) can impose additional conditions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there additional restrictions on marketing to government entities or similar investors (e.g. sovereign wealth funds) or pension funds or insurance company investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Sovereign and government investors are typically classified as Market Counterparties or deemed Professional Clients, so the same private-placement framework applies; historically, onshore exclusions existed for approaches to government bodies and licensed financial institutions, but the post-2023 regime has narrowed exemptions and the current position should be verified before relying on any carve-out. There are no additional marketing licences specific to SWFs, but engagement with them raises anti-bribery, procurement-policy and sovereign-immunity considerations, and their internal mandates drive extensive side-letter terms. UAE pension funds and insurers are subject to their own investment and solvency regulations (eg Central Bank rules for insurers), which constrain what they may buy rather than how they may be approached.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on the use of intermediaries to assist in the fundraising process?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Onshore, only CMA-licensed promoters may promote funds, and introducing investors to financial service providers is itself a regulated\/approval-based activity. In the DIFC and ADGM, placement and distribution activity constitutes regulated arranging\/advising\/offering, so placement agents must be appropriately licensed in the relevant centre (or act from outside it without triggering the centre&#8217;s perimeter). Success-fee arrangements with unlicensed finders are a recurring enforcement risk across all three jurisdictions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the use of \u201cside letters\u201d restricted?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No specific statutory restrictions apply in any of the three jurisdictions. Side letters are widely used and enforceable as a matter of contract (the DIFC and ADGM courts apply common-law contract principles). Managers must, however, comply with general duties \u2013 acting in the best interests of the fund and treating unitholders of the same class fairly \u2013 so preferential terms that disadvantage other investors (eg preferential redemption or transparency rights in open-ended funds) require careful handling. Public Funds&#8217; equal-treatment and disclosure requirements make side letters largely impractical in retail structures.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements with respect to side letters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no dedicated side-letter disclosure regime in the DIFC or in onshore UAE. Disclosure obligations for these jurisdictions arise indirectly: prospectus\/offering documents must contain all material information and typically disclose the existence and general nature of side letters; fair-treatment duties support disclosure of material preferential terms (particularly liquidity or information rights in hedge structures); and MFN processes in closed-ended funds deliver contractual disclosure to electing investors. Managers marketing to EU\/UK or US investors will in practice also apply Alternative Investment Fund Managers Directive (AIFMD)-style or Advisers Act-style preferential-treatment disclosure. In the ADGM, however, side-letter arrangements are acknowledged and a Fund Manager\u2019s ability to enter into such an arrangement should be disclosed in its prospectus.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the most common side letter terms? What industry trends have recently developed regarding side letter terms?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Common terms include MFN clauses (usually tiered by commitment size); fee discounts; co-investment rights; LPAC seats; enhanced reporting and transparency; excuse rights \u2013 with Sharia-compliance excuse provisions a distinctive regional feature alongside sanctions, legal and regulatory excuses; transfer pre-approvals; capacity rights; key-person notifications; and, for sovereign investors, sovereign-immunity preservation, confidentiality\/freedom of information (FOI) carve-outs and jurisdiction\/arbitration provisions (regional investors frequently opt for DIFC-LCIA-successor (DIAC), DIFC or ADGM court jurisdiction, or international arbitration). Recent trends include environmental, social and governance (ESG) and sanctions\/anti-money-laundering representations, expanded co-investment and fee-transparency terms (influenced by international regulatory developments), tighter MFN tiering, and increased use of umbrella side-letter \u2018compendiums\u2019 to manage proliferating terms.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">4458<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/148042","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=148042"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}