The global hedge fund industry is undergoing a seismic shift, one that is redefining the map of financial services. Gone are the days when New York, London, and Hong Kong were the undisputed hubs for hedge funds. Today, cities like Abu Dhabi and Dubai are stepping into the limelight, challenging traditional strongholds, and rapidly transforming into new epicentres of financial activity. With over 20 hedge funds licensed to trade in Dubai as of 2023 —and projections to potentially double that number by the end of 2024[1] — it’s clear that the UAE is no longer just a regional player. It’s becoming a global heavyweight.
A Magnet for Hedge Funds: What’s Driving the UAE’s Success?
The shift in hedge fund location seems to be a long-term affair. Hedge funds have moved senior trading staff to the region rather than solely a sales effort and these staff have moved with families indicating a longer term commitment. In addition, the UAE is focused on training locals in support functions that are required for servicing these staff.
A key factor in the UAE’s growth as a hedge fund hub has been the expansion of multi-PM (portfolio manager) platform funds. These multi-strategy funds invest across a wide range of strategies but certain areas have thrived in the UAE due to their global market focus, including quantitative, discretionary macro, and commodities trading. The UAE’s effective response to COVID-19 further accelerated this shift, highlighting further the country’s suitability as a hedge fund location, showcasing high living standards and capacity for remote work. This is reflected in Dubai and Abu Dhabi securing the top two positions on Savills 2024 Executive Nomad Index.[2]
The UAE’s rapid emergence as a hedge fund hub isn’t just happenstance. A perfect combination of ambitious government initiatives, a thriving financial market, a supportive regulatory framework, business-friendly policies, access to talent and capital, and world-class connectivity, have made the UAE a magnet for hedge funds.
Forward-thinking government strategies like the Abu Dhabi Economic Vision 2030 and the Dubai Economic Agenda D33, as well as financial free zones like the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), have set the stage for a fertile regulatory environment that is both robust and accommodating, offering 100% foreign ownership, streamlined business registration processes and a favourable tax regime.
Strategically located between East and West, with a central time zone and two-thirds of the world’s population within an eight-hour flight, the UAE provides hedge fund managers unparalleled access to markets across Europe, Asia, and Africa. This geographic advantage, combined with the UAE’s stability, safety, and high quality of life, makes it an ideal base for seamless global market connectivity.
The UAE’s dynamic financial markets have also played a crucial role, with a surge in IPOs and reforms boosting investor confidence and attracting global interest. Moreover, the UAE’s diversification drive offers wider opportunities for investment returns across various sectors, from real estate to technology.
Innovation is another cornerstone of the UAE’s appeal. The UAE’s thriving fintech ecosystem, bolstered by the DIFC’s Innovation Hub and ADGM’s tech-friendly policies, offers hedge funds a cutting-edge environment in which to grow.
Access to capital is another significant draw, with Abu Dhabi being recognised as the ‘capital of capital,’ and both emirates boasting numerous venture capital firms and investors. Lastly, the UAE’s commitment to upskilling talent ensures a steady supply of skilled professionals to meet the demands of the growing hedge fund industry.
Partnering for Success: The Vital Role of Financial Institutions
The UAE’s ambition to be a leading global financial hub hinges on the strength of its entire financial ecosystem. To sustain its momentum as a hedge fund hub, collaboration between new hedge funds and existing financial institutions is essential.
Financial institutions already established in the UAE are uniquely positioned to support hedge funds, from navigating regulatory landscapes to providing specialised services. Beyond a transactional relationship, financial institutions must foster partnerships built on trust, innovation, and knowledge exchange, helping set industry standards and attracting and retaining hedge funds to ensure a thriving and stable financial community.
Navigating the Path to Sustained Growth
While the UAE’s rise as a hedge fund hub is impressive, maintaining this trajectory requires addressing a few challenges. The increasing demand for skilled professionals makes it essential to create a talent pipeline that supports sustainable growth, to be achieved by attracting international talent all the while developing and upskilling local expertise.
Economic diversification will also play a vital role. The UAE will need to continue attracting large corporates and emerging industries, particularly in high-growth sectors like artificial intelligence, to strengthen capital markets and provide the resilience needed to withstand market fluctuations.
To stay ahead, the UAE must continue to innovate and capitalise on its unique strengths to compete with the attractive alternatives offered by traditional financial centres like New York, London and Hong Kong, or emerging regions such as Singapore or Miami.
A Bright Future
The geographical shift in the hedge fund landscape marks a significant change in the industry’s history. However, it is not the first time a major transition in hedge funds’ locations has occurred and the ease by which these communities can move when the balance of preferences reaches a critical mass should not be underestimated.
As the UAE emerges as a leading hub, its long-term success will depend on its ability to adapt and innovate. Leveraging its strategic advantages and fostering a culture of collaboration are key to continue attracting leading hedge funds and strengthen the UAE’s position on the global financial stage.
Looking ahead, the UAE’s commitment to building a world-class financial ecosystem — one that is innovative, resilient, and inclusive — will be crucial. With the right strategies in place, the UAE is poised not just to compete but to lead, shaping the future of the global hedge fund industry.
[1] UBP – DFSA, 2023.
[2] Savills Executive Nomad Index 2024.
NOTE: The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of any agency of this website. This content is provided for informational purposes only and is not intended as a substitute for professional advice. The reader is encouraged to seek their own professional counsel on matters discussed within.
