{"id":148496,"date":"2026-08-26T14:51:10","date_gmt":"2026-08-26T14:51:10","guid":{"rendered":"https:\/\/www.legal500.com\/guides\/?post_type=legal-landscapes&p=148496"},"modified":"2026-09-09T13:58:03","modified_gmt":"2026-09-09T13:58:03","slug":"united-arab-emirates-alternative-investment-funds","status":"publish","type":"legal-landscapes","link":"https:\/\/www.legal500.com\/guides\/legal-landscapes\/united-arab-emirates-alternative-investment-funds\/","title":{"rendered":"United Arab Emirates- Alternative Investment Funds"},"content":{"rendered":"
    \n
  1. \n

    What is the current legal landscape for Alternative Investment Funds<\/strong> in your jurisdiction?<\/strong><\/h4>\n<\/li>\n<\/ol>\n

    Background<\/strong><\/p>\n

    \u201cAlternative Investment Fund\u201d (AIF) is primarily a market term in the U.A.E., rather than a single statutory fund category comparable to the term used in the E.U. Alternative Investment Fund Managers Directive (AIFMD). AIFs are regulated through three principal regimes:<\/p>\n

      \n
    • the federal or mainland regime overseen by the Capital Market Authority (CMA);<\/li>\n
    • the Dubai International Financial Centre (DIFC) regime overseen by the Dubai Financial Services Authority (DFSA); and<\/li>\n
    • the Abu Dhabi Global Market (ADGM) regime overseen by the Financial Services Regulatory Authority (FSRA).<\/li>\n<\/ul>\n

      The mainland U.A.E. is a civil-law jurisdiction. DIFC and ADGM are separate common-law financial free zones, each with its own legislation, courts, company regimes and independent financial regulators (DFSA and FSRA). ADGM applies the common law of England and Wales, with some exceptions. DIFC has its own common law which was initially based on the law of England and Wales.<\/p>\n

      Mainland<\/strong><\/p>\n

      The federal framework is principally set out in Federal Decree by Law No.\u00a0(33) of 2025 (Capital Market Law), which took effect on 1 January 2026. The Capital Market Law uses the term Investment Fund, rather than AIF, and requires activities and services relating to the establishment and management of investment funds to be licensed by the CMA. The Capital Market Law provides that investment funds have separate legal personality and independent financial liability and may take either of the following forms:<\/p>\n

        \n
      • an investment fund established and licensed by a decision of the CMA; or<\/li>\n
      • any form of commercial company provided for under the U.A.E. Companies Law and established in accordance with it, subject to the prior approval of the CMA.<\/li>\n<\/ul>\n

        The detailed framework continues to be governed by the SCA Board of Directors\u2019 Chairman Decision No.\u00a0(01\/RM) of 2023 (Investment Fund Regulations), and is presently transitional, as it was issued by the CMA\u2019s predecessor. The Capital Market Law preserves earlier secondary legislation to the extent that it does not conflict with the new law. The current secondary legislation will remain in force until new implementing regulations are issued. The Capital Market Law requires the CMA\u2019s board of directors to adopt regulations governing investment funds, and market participants must comply with the new legal framework by 1 January 2027. We therefore expect the new secondary legislation on investment funds to be issued in the near future.<\/p>\n

        According to the Investment Fund Regulations, the minimum subscription amount for onshore private funds is AED\u00a0180,000, which must be transferred to the fund\u2019s bank account in the U.A.E. Mainland private funds may be open-ended or closed-ended.<\/p>\n

        The Investment Fund Regulations also recognise and provide rules for a number of fund classes commonly associated with alternative investment strategies: Real Estate Investment Funds, Real Estate Investment Trusts (REIT), Eligible Commodities Investment Funds, Precious Metals Investment Funds, Credit Funds, Private Equity Funds, Venture Capital Funds, and others. Credit Funds, PE & VC Funds must be structured as closed-ended private funds in mainland U.A.E. The Investment Fund Regulations further recognise and regulate various other fund classifications, such as Master Funds, Umbrella Funds, Funds of funds, Feeder Funds.<\/p>\n

        DIFC<\/strong><\/p>\n

        The primary source of Investment Funds Law in DIFC is the Collective Investment Law, DIFC Law No.\u00a02 of 2010, supplemented by Collective Investment Rules Module of the DFSA Rulebook. Other relevant modules include the Conduct of Business Module, General Module, Prudential \u2014 Investment, Insurance Intermediation and Banking Module, Fund Protocol Rules Module; AML, CTF and Sanctions Module.<\/p>\n

        A DIFC fund may be structured as an Investment Company, an Investment Partnership, or an Investment Trust. Incorporated Cell Companies and Protected Cell Companies are also available. In early 2026 DIFC introduced a Variable Capital Company regime similar to Singaporean law, which also may be used to structure investment funds.<\/p>\n

        For AIFs offered to professional investors, the principal regulatory categories are the Exempt Fund and the Qualified Investor Fund (QIF). Units in such funds may be distributed only by private placement. All investors must be classified as Professional Clients, and the minimum initial subscription is USD 50,000 for Exempt Funds and USD 500,000 for QIFs. The regulation of Exempt Funds and QIFs is lighter than the Public Fund regime available to retail investors. Neither category is subject to a maximum number of investors under the current law. The Fund Manager must notify the DFSA at least 14 days before the initial offer of units in an Exempt Fund or QIF to investors and, for a closed-ended fund, before any subsequent offer.<\/p>\n

        The DFSA Rulebook contains specialist provisions for Private Equity Funds, Property Funds, Real Estate Investment Trusts (REIT), Hedge Funds, Venture Capital Funds, Credit Funds and others. Master Funds, Umbrella Funds, Fund of funds, Feeder Funds are also available.<\/p>\n

        A DIFC fund may currently be managed by a DFSA-licensed Fund Manager or, subject to the applicable conditions, by a regulated External Fund Manager based in a recognised jurisdiction, such as the U.S.A., the U.K., the E.U., Switzerland, Hong\u00a0Kong, Singapore or certain others. One of the main conditions applicable to an External Fund Manager is the appointment of a DFSA-licensed Fund Administrator for the fund.<\/p>\n

        DIFC Consultation Paper No.\u00a0173<\/strong><\/p>\n

        In July 2026, the DFSA published Consultation Paper No. 173, which proposed the most extensive review of its Collective Investment Fund framework since 2010. The paper proposed removing some classification-based regulation of AIFs and replacing it with a more flexible, risk-based approach that accommodated hybrid and multi-strategy funds. In particular, the DFSA proposed to:<\/p>\n

          \n
        • remove the specialist class requirements for Exempt Funds that are constituted as Money Market Funds and Private Equity Funds;<\/li>\n
        • remove the specialist class requirements for Exempt Funds and QIFs that are constituted as Credit Funds.<\/li>\n<\/ul>\n

          Instead, the DFSA proposed a greater regulatory focus on risk management, in particular:<\/p>\n

            \n
          • apply the existing specialist class requirements on risk management on a horizontal basis;<\/li>\n
          • introduce new risk management system and fund risk profile requirements;<\/li>\n
          • require QIFs and Exempt Funds to calculate borrowing limits in a reasonable and prudent manner, as well as to disclose the expected maximum level of borrowing and the basis on which it was determined.<\/li>\n<\/ul>\n

            Another significant proposed change was that the External Fund Manager regime would be entirely removed, meaning that only DFSA-licensed Fund Managers would be able to establish and operate investment funds in DIFC. These were consultation proposals, not current law. The Consultation Paper remained open for comments until 7 September 2026.<\/p>\n

            ADGM<\/strong><\/p>\n

            The principal relevant ADGM statute is the Financial Services and Markets Regulations 2015. The FSRA has also issued several Rulebooks applicable to AIFs, including:<\/p>\n

              \n
            • Fund Rulebook;<\/li>\n
            • Fund Passporting Rules;<\/li>\n
            • Conduct of Business Rulebook;<\/li>\n
            • AML and Sanctions Rulebook;<\/li>\n
            • Prudential \u2014 Investment, Insurance Intermediation and Banking Rulebook;<\/li>\n
            • General Rulebook.<\/li>\n<\/ul>\n

              An ADGM Domestic Fund may be established as a body corporate, a partnership, or an Investment Trust. Protected Cell Companies and Incorporated Cell Companies are also available, subject to approval of the FSRA.<\/p>\n

              As in DIFC, the principal private-fund categories in ADGM are the Exempt Fund and the QIF:<\/p>\n

                \n
              • an Exempt Fund may be offered only by Private Placement to Professional Clients and requires a minimum initial subscription of USD\u00a050,000; and<\/li>\n
              • a QIF is subject to the same Private Placement and Professional Client restrictions but requires a minimum initial subscription of USD\u00a0500,000.<\/li>\n<\/ul>\n

                The Fund Manager of an Exempt Fund or a QIF must notify the FSRA at least 14\u00a0days before the initial offer to issue units in the fund and, in the case of a closed-ended fund, any subsequent offer to issue units. An ADGM fund may be managed by an ADGM-authorised Fund Manager or, where the requirements are met, a Foreign Fund Manager from a recognised jurisdiction. The Foreign Fund Manager regime is therefore currently available, although the FSRA has proposed additional controls over its use.<\/p>\n

                The FSRA has separate requirements for specialist fund classes: Real Estate Investment Trust (REIT), Venture Capital Funds, Private Credit Funds, as well as specific ADGM Green Funds and ADGM Climate Transition Funds. Notably, the FSRA has introduced a framework for REITs that may be offered by private placement to Professional Clients only (private REITs).<\/p>\n

                Although the FSRA framework does not directly provide regulations for Hedge Funds and Private Equity Funds, such funds may still be authorised to pursue these alternative investment strategies, subject to compliance with FSRA rules. Master Funds, Feeder Funds, Umbrella Funds are also available under the FSRA framework.<\/p>\n

                It is important to state that although DFSA and FSRA fund legal landscapes are similar in some way, they are not exactly the same. Some prudential requirements for local Fund Managers also differ. More importantly, the choice between ADGM and DIFC should not be based on minimum subscription amounts or the list of designated fund classes. The more important considerations are the fund strategy, the location of the manager and investors, the proposed service providers and the detailed prudential rules.<\/p>\n

                ADGM Consultation Paper No.\u00a012 of 2025<\/strong><\/p>\n

                In November 2025, the FSRA published Consultation Paper No. 12 of 2025 on proposed changes to the regulation of Funds and Fund Managers.<\/p>\n

                One proposal is a streamlined Sub-Threshold Fund Manager regime for managers who match the following criteria:<\/p>\n

                  \n
                • whose aggregate Maximum Committed Capital does not exceed USD 200 million;<\/li>\n
                • manage only closed-ended Exempt Funds or QIFs;<\/li>\n
                • not appointed by fund sponsors.<\/li>\n<\/ul>\n

                  This proposal is inspired by the sub-threshold regime applicable under the E.U. AIFMD. A Sub-Threshold Fund Manager would not be required to appoint a Finance Officer or maintain a separate internal audit function. Such a Fund Manager would be subject to a USD\u00a050,000 Base Capital Requirement, but not to the Expenditure-Based Capital Minimum.<\/p>\n

                  The FSRA also proposes an Institutional Fund Manager regime for managers of QIFs, or equivalent foreign funds, offered exclusively to institutional investors and subject to a minimum initial subscription of USD\u00a05 million.<\/p>\n

                  Rather than removing the Foreign Fund Manager regime, the FSRA proposes tightening it. Under the proposed framework:<\/p>\n

                    \n
                  • a Foreign Fund Manager could manage only closed-ended ADGM QIFs;<\/li>\n
                  • ADGM funds would require a U.A.E.-resident director;<\/li>\n
                  • only an ADGM-licensed Fund Administrator would be allowed for ADGM funds managed by Foreign Fund Managers;<\/li>\n
                  • the Foreign Fund Manager would have to submit to ADGM law and the jurisdiction of the ADGM Courts.<\/li>\n<\/ul>\n

                    The Consultation Paper also requested industry feedback on the existing specialist regimes for fund classes. The consultation closed on 30 January 2026. The second Consultation Paper on Investment Fund regulation is expected to be published later in 2026.<\/p>\n

                      \n
                    1. \n

                      What three essential pieces of advice would you give to clients involved in Investment Funds<\/strong> matters?<\/strong><\/h4>\n<\/li>\n<\/ol>\n

                      Fund sponsors and managers<\/strong><\/p>\n

                        \n
                      • Map the proposed investors before choosing the jurisdiction<\/strong>. Start with a clear understanding of who your potential U.A.E. investors are, including where they are based, whether they are qualified to invest in your Investment Fund and the minimum amount they can subscribe. Each of these factors affects the regulatory requirements that apply to your investment fund in the U.A.E., as well as which jurisdiction and regulator are relevant for you: mainland (CMA), DIFC (DFSA) or ADGM (FSRA).<\/li>\n
                      • Build the AML, CTF, CPF and sanctions framework around the actual operating model<\/strong>. The policies must reflect how investors are introduced, screened, approved and monitored in practice. They should clearly allocate responsibility for source-of-funds and source-of-wealth checks, sanctions screening, suspicious-transaction escalation and ongoing monitoring.<\/li>\n
                      • Test the strategy against the specialist fund rules<\/strong>. Determine whether the fund falls within a specialist category and whether the relevant requirements apply to its regulatory classification. This is particularly important for multi-strategy Funds and for strategies involving leverage, credit, illiquid assets, short selling or frequent redemptions.<\/li>\n<\/ul>\n

                        Investors<\/strong><\/p>\n

                          \n
                        • Negotiate investor-specific protections before subscribing<\/strong>. Protect your interests by negotiating side letters whenever possible before making investments. Side letters are agreements that can clarify or amend specific terms of your investment. Always seek legal advice before signing to confirm that the side letter is valid, compliant with applicable laws, binding, and enforceable.<\/li>\n
                        • Verify the fund\u2019s assets, valuation and custody arrangements<\/strong>. Where no reliable public record exists, investors should seek independent evidence of material assets and review how they are held, valued and reported. Particular care is required where valuation is controlled by the manager or an affiliate.<\/li>\n
                        • Review the exit route before committing capital<\/strong>. Investors should understand the fund term, extension rights, redemption restrictions, transfer conditions, continuation-fund provisions and any approval rights held by the manager. For illiquid investments, the proposed exit arrangements should be tested against what can realistically be achieved.<\/li>\n<\/ul>\n
                            \n
                          1. \n

                            What are the greatest threats and opportunities in AIF<\/strong> law in the next 12\u00a0months?<\/strong><\/h4>\n<\/li>\n<\/ol>\n

                            Opportunities<\/strong><\/p>\n

                              \n
                            • Removal of the U.A.E. from the E.U. list of high-risk third countries<\/strong>. Commission Delegated Regulation (EU) 2025\/1184 removed the U.A.E. from the E.U. list of high-risk third countries for AML and CFT purposes. This decision entered into force in early August 2025. It is expected to facilitate European investments in AIFs domiciled in the U.A.E., as it reduces some of the enhanced due-diligence burden.<\/li>\n
                            • GCC Fund Passporting<\/strong>. The GCC financial market authorities approved a regional fund-passporting framework in November 2024. Further implementation across participating states could simplify the cross-border promotion of funds, widen the available investor base and reduce the need for separate distribution processes in each GCC jurisdiction.<\/li>\n
                            • Modernisation of the three fund regimes<\/strong>. The federal, DIFC and ADGM frameworks are all undergoing material review. The proposed direction is towards regulation based more closely on the fund\u2019s actual risks and investor profile, rather than its label alone. This may make it easier to structure hybrid, multi-asset and institutional funds once the final rules are known.<\/li>\n
                            • Corporate Tax<\/strong> changes<\/strong>. Under the U.A.E. Corporate Tax Law, a fund recognised as a Qualifying Investment Fund may be exempt from Corporate Tax, provided that the applicable conditions are met and maintained. The changes introduced mainly by Cabinet Decision No. 34 of 2025 provide that profit distributions received from a Qualifying Investment Fund may be excluded from an investor\u2019s taxable income. The new law also introduced the Qualifying Limited Partnership regime, under which a partnership may have legal personality while remaining exempt from Corporate Tax. The 2025 changes also revised the tax treatment of Real Estate Investment Trusts. These amendments apply to tax periods beginning on or after 1 January 2025, meaning that the first tax returns under the new regime will be filed in September 2026. Together with the absence of personal income tax for individual investors, certain corporate investors may separately benefit from the 0% Corporate Tax rate on Qualifying Income as a Qualifying Free Zone Person or from the Participating Interest exemption, subject in each case to the statutory conditions. A 0% withholding tax rate may also apply to certain UAE-sourced income paid to non-residents. Overall, these changes make U.A.E.-based investment funds more attractive.<\/li>\n<\/ul>\n

                              Threats<\/strong><\/p>\n

                                \n
                              • Regulatory transition<\/strong>. The federal regime is operating under transitional secondary legislation, while both the DFSA and the FSRA have proposed extensive changes. Fund Managers may therefore have to revise fund documents, regulatory permissions, governance arrangements, service-provider contracts and internal policies within overlapping implementation periods. The possible removal of the DIFC External Fund Manager regime and tighter ADGM requirements for Foreign Fund Managers would also increase local substance and operating costs. Although such changes may create long-term value, as explained above in the Opportunities section, compliance with new rules will require effort and resources in the short term. Implementation uncertainty is also a universal factor when new laws are issued.<\/li>\n
                              • New AML law<\/strong>. Federal Decree by Law No. (10) of 2025 and Cabinet Resolution No. (134) of 2025 have replaced the previous federal AML legislation. The new framework lowers the threshold for establishing an offence, broadens compliance obligations, and raises the penalties for breaches. Fund Managers should review their enterprise-wide risk assessments, customer due-diligence procedures, source-of-funds and source-of-wealth controls, sanctions and targeted financial sanctions procedures, suspicious-transaction reporting processes and staff training. A policy that does not match the Fund Manager\u2019s actual operations creates both regulatory and evidential risk.<\/li>\n
                              • Geopolitical tensions in the region.<\/li>\n<\/ul>\n
                                  \n
                                1. \n

                                  How do you ensure high client satisfaction levels are maintained by your practice?<\/strong><\/h4>\n<\/li>\n<\/ol>\n

                                  At CHENINS, when we assess our performance, only one opinion truly matters: the client\u2019s. Everything we do is designed to (1) achieve the business results our clients need and (2) provide an outstanding experience with our services.<\/p>\n

                                  At the outset of each matter, we give the client a clear roadmap, explain how we will handle potential issues, and provide updates at every stage. Clients are actively involved and consulted when material actions are required. This approach brings clarity and comfort and helps to manage expectations.<\/p>\n

                                  We aim to be not just legal advisers but strategic partners who support management teams and business owners at special moments in their business journeys. Our advice is straightforward, in plain English, and commercially focused.<\/p>\n

                                  We look for every chance to add extra value to our clients. In Corporate M&A, for example, we act as \u201cdeal masters\u201d, not merely legal counsel. We manage the process end to end, coordinate with clients\u2019 in-house teams and external advisers, and keep everyone on track, reducing the client\u2019s administrative burden. Moreover, when clients engage CHENINS, they gain access to our business network: banks, investors, technology providers, and consultants around the world.<\/p>\n

                                    \n
                                  1. \n

                                    What technological advancements are reshaping Alternative Investment Funds<\/strong> law and how can clients benefit from them?<\/strong><\/h4>\n<\/li>\n<\/ol>\n

                                    Artificial Intelligence<\/strong><\/p>\n

                                    AI is helping AIF lawyers reduce the time and cost involved in transactions. During due diligence, AI tools can review documents across large data rooms and internal databases, extract key information and identify inconsistencies. This allows legal teams to work more efficiently under tight deadlines and allocate resources more effectively.<\/p>\n

                                    AI also reduces the burden of routine legal work. Standard agreements and letters can be drafted using the fund\u2019s own templates, while on-premises chatbots can respond to recurring legal queries from fund teams.<\/p>\n

                                    Clients benefit because less time and money are spent on legal and back-office processes, improving the fund\u2019s overall efficiency.<\/p>\n

                                    Deploying AI within the fund manager\u2019s own servers can also strengthen privacy and cybersecurity. When trained on the fund manager\u2019s documents, operations and applicable regulations, AI can provide more accurate and tailored support, particularly when identifying inconsistencies, omissions or gaps in documentation.<\/p>\n

                                    The aim is not to replace lawyers and compliance officers, but to reduce the risk of human error and allow professionals to focus on matters requiring judgement and experience. AI agents can also take over repetitive tasks such as ongoing monitoring.<\/p>\n

                                    Fund Administration Platforms<\/strong><\/p>\n

                                    Online fund administration platforms give investors secure, real-time, 24\/7 access to fund documentation, capital accounts and reports. These solutions also centralise the issuance of capital calls and document e-signing and coordinate tax compliance. This significantly improves the investor experience when interacting with AIFs.<\/p>\n

                                    Fund administration platforms also help set up and manage funds and SPVs. They reduce the time and administrative burden of launching new entities. These digital tools allow fund managers to begin operations more efficiently and with greater transparency from day one.<\/p>\n

                                    Automated KYC\u00a0\/\u00a0AML<\/strong><\/p>\n

                                    Onboarding no longer needs to be a bottleneck. Automated KYC solutions verify identities quickly and consistently, reducing the risk of human error. As a result, investors save time and money when subscribing to AIFs.<\/p>\n

                                    Ongoing monitoring tools then screen for AML\u00a0\/\u00a0CTF red flags in the background, allowing AIF compliance teams to identify issues early<\/strong>. Such solutions reduce the fund\u2019s AML exposure and overall risk for investors.<\/p>\n

                                      \n
                                    1. \n

                                      Describe a particularly interesting or complex matter you have advised on recently, and explain the challenges involved, your approach, and the outcome achieved for the client?<\/strong><\/h4>\n<\/li>\n<\/ol>\n

                                      CHENINS acted for a single-family office considering a substantial commitment to a U.A.E.-focused Private Equity Fund. We reviewed the limited partnership agreement, private placement memorandum and other subscription documents, identified the key legal and commercial risks, and translated the fund terms into a practical risk memorandum with clear negotiation points for the client.<\/p>\n

                                      The fund documents gave the manager broad discretion over investments, expenses, conflicts of interest, the allocation of investment opportunities and extensions to the fund term. CHENINS negotiated additional investor protections and drafted a bespoke side letter. The agreed terms included enhanced reporting rights, clearer limits on expenses, stronger conflict-management provisions and additional protections relating to changes in the fund\u2019s strategy and key personnel.<\/p>\n

                                      In parallel, CHENINS\u2019 accounting and tax practice coordinated the subscription process with the fund manager and advised the client on the U.A.E. Corporate Tax consequences of the investment.<\/p>\n

                                      The client completed the investment on improved terms, with enhanced contractual protections and greater certainty as to the tax consequences. CHENINS provided combined legal and tax support throughout, ensuring that the transaction proceeded promptly and smoothly.<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-148496","legal-landscapes","type-legal-landscapes","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/legal-landscapes\/148496","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/legal-landscapes"}],"about":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/types\/legal-landscapes"}],"wp:attachment":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=148496"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}