Dubai’s free trade zone, Dubai International Financial Centre (DIFC), is bidding to become a competitive fund domicile by launching a regulation-lite fund regime for certain private funds.
Its local regulator, Dubai Financial Services Authority (DFSA), published a consultation paper proposing a Qualified Investor Exempt Fund (QIEF) regime which would strip some of the jurisdictions fund regulations, but only for firm’s soliciting professional investors.
The proposal requires a $1 million minimum investor subscription, with a maximum of 50 investors per fund, but would be “significantly less stringent” than current fund regulatory thresholds, according to the DFSA.
The detailed specialist fund requirements in Dubai’s Collective Investment Rules (CIR) Module will not be applied to QIEFs. For instance, the DFSA would get rid of the current requirement for a custodian to hold the fund’s assets and only require regulatory reporting once a year as opposed to the current bi-annual regime.
The DFSA has made moves to encourage funds to domicile in the DFIC in the past. In 2010, the fund manager application fee was lowered to $10,000, from $40,000, and the scope for marketing foreign funds in the free trade zone was expanded.
The Carlyle Group became the first major fund advisor to take advantage of the DFIC back in 2011 when it set up Carlyle MENA Investment Advisors. The vehicle which did not raise any new capital instead formed part of Carlyle’s existing 2009 vintage $500 million Carlyle MENA fund.
The aim of the DIFC fund was primarily to give GCC-based Carlyle investors the flexibility to invest in a broader array of sectors. There are restrictions in some Gulf States regarding which sectors can be invested in by foreign funds. The DIFC fund allowed GCC-based Carlyle investors to invest in these restricted sectors, which vary from state to state and include sectors like media and banking.