1.    Fund Management Business in ADGM

Abu Dhabi Global Market (ADGM) is a purpose-built financial free zone, located within the Emirate of Abu Dhabi. ADGM offers license to carry out a wide range of financial and non-financial business activities. Financial business activities are regulated by a special regulatory body called the Financial Services Regulatory Authority (FSRA). Any person who wishes to conduct a business in ADGM has to register a legal entity/body corporate under ADGM rules and regulations, and if the business is regulated under FSRA, then such a legal entity is also required to get special approval from FSRA.  

ADGM’s Financial Services Regulatory Authority was established to advocate a progressive financial services environment and uphold the integrity of the whole international financial centre by managing any potential risk exposure and undesirable impacts.

Let’s understand how the Fund Management business is defined under ADGM and FSRA rules and regulations. Fund Management business is legally called as “Managing a Collective Investment Fund” in accordance with the ADGM/FSRA rules. In accordance with AGMD Rulebook Article 2.12.1:

Managing a Collective Investment Fund

1. Managing a Collective Investment Fund is a specified kind of activity
2. A person manages a Collective Investment Fund when the person –
   • is legally accountable to the Unitholders in the Collective Investment Fund for the management of the property held for or within a Collective Investment Fund under the Collective Investment Fund’s Constitution; or
   • establishes, manages or otherwise operates or winds up a Collective Investment Fund.”

Thus, an entity that engages in Fund Management activity is called a “Fund Manager” who is legally accountable to the Unitholders(In relation to a Fund, means any holder of a Unit in the Fund or of any right or interest in such a Unit, and whose name is entered on the Fund’s register in relation to that Unit (as per FSRA definition) for the management of the Fund, including the property held for or within the Fund, and who establishes, manages, or otherwise operates or winds up the Fund. While this permission also includes the financial service of ‘Managing Assets’ in respect of the Fund, (see definition of ‘Asset Manager’ below) a Fund Manager may delegate this asset management function to a third party.

The term ‘Asset Manager’ (alternatively referred to as ‘Investment Manager’) is the person who Managing on a discretionary basis assets belonging to another person is a specified kind of activity if the assets include any Financial Instrument, Virtual Asset, Spot Commodity or rights under a Contract of Long-Term Insurance, not being a contract of reinsurance. A person who performs this financial service in the ADGM must obtain from the FSRA the regulatory permission of ‘Managing Assets’. Note, however, that a person who performs the financial service of ‘Managing Assets’ is not, by virtue of this permission, a Fund Manager. Specific authorisation requirements, procedures and ongoing obligations, including a higher base capital requirement, apply to Asset Managers.

The Fund Management activity in ADGM can be conducted either by a legal entity established in ADGM and licensed by FSRA, or by a foreign company that originates from a Recognized Jurisdiction. The Fund Manager that is established in ADGM and licensed by FSRA is hereby called Domestic Fund Manager, and the Fund Manager that is established in a (foreign) Recognized Jurisdiction is called Foreign Fund Manager.

The distinction between the Domestic Fund Manager and the External Fund Manager is as below:

• Domestic Fund Manager is a Fund Manager who is incorporated in the ADGM and is licensed and regulated by the FSRA to provide the financial service of managing either Domestic Funds or External Funds.

• Foreign Fund Managers is a Foreign Fund Manager who is permitted to establish and manage a Domestic Fund in the ADGM without establishing a place of business in the ADGM. The Foreign Fund Manager must be subject to regulation by a Financial Services Regulator in a Recognised Jurisdiction (as defined by the FRSA) and subject itself to the ADGM laws and jurisdiction of the ADGM courts. The Foreign Fund Manager must appoint a Fund Administrator or Trustee based in the ADGM to act as its agent in its dealings with the FSRA, Unitholders, and prospective Unitholders.

2.    Types of Fund Structures in ADGM

There are several types of Domestic Funds, including Public Funds, Exempt Funds, and Qualified Investor Funds (“QIF”), which are defined as below.

• Public Funds: A Domestic Fund shall be constituted as a Public Fund if: some or all of its Units are or will be offered to investors by way of a public offer; or its Unitholders include Retail Clients.

• Exempt Funds: A Domestic Fund is an Exempt Fund, if: its Units are offered to persons only by way of a private placement; all its Unitholders are persons who meet the criteria to be classified as Professional Clients; and the initial subscription to be paid by a person to become a Unitholder is at least US$50,000,

• Qualified Investment Funds (QIF): A Domestic Fund is a Qualified Investor Fund, if: its Units are offered to persons only by way of a private placement; all its Unitholders are persons who meet the criteria to be classified as Professional Clients; and the initial subscription to be paid by a person to become a Unitholder is at least US$500,000.

Types of ADGM Funds that can be managed by either a Domestic or an External Fund Manager (with exceptions):

Three types of vehicles can be used to establish a Domestic Fund in the ADGM, namely Investment Companies, Investment Trusts and Investment Partnerships.

3.    Fees and Costs of Establishing a Fund Management Business in ADGM

There are two sides to consider while calculating the costs of establishing the Domestic Funds Manager entity. First side is the fees paid to ADGM authority for incorporating the legal entity and the second side is the fees paid to FSRA for the regulatory approval. The below fees are indicative and may change based on the nature of business.

ADGM Registrar of Companies fees for incorporating the Fund Manager entity along with annual license fees would be approx. $19,000.

Also, since the Fund Manager activity is regulated by Financial Services Regulatory Authority of ADGM, the FSRA fees is usually $10,000 application fee and $10,000 fees for annual renewal, which can vary based on the Fund type and nature of business. Moreover, there is additional $10,000 supervision fees to be paid.

Each Fund setup also incurs fees from $2,000 to $6,000 per annum based on the Fund type.

Capital Requirements for Fund Managers:

* Fund Managers are required to maintain expenditure-based capital equal to their 13 weeks expenses.

4.1.        Office Space Rent:

Every entity registered in the ADGM is required to lease a physical office. The rent varies based on the building and location. To give you an idea, below are the fees for renting an office in ADGM per year.

Interested in Fund Management in DIFC Instead?
If you’re looking to learn about setting up a fund management business in the DIFC, click here to read our detailed guide on Fund Management in DIFC.

4.    Requirements:

To obtain a FSRA Licence, the proposed Fund Manager need to demonstrate to the FSRA that:

It has adequate systems and controls to manage the type of Fund it propose to establish; and

The individuals performing certain functions within the firm, such as its Board members, senior management and key control functions (e.g. compliance) meet the relevant suitability and integrity criteria.

Once entity has been granted a Licence, the FSRA will supervise on an on-going basis, your activities which relate to the Funds you manage.

The FSRA requires Fund Manager entity be adequately staffed depending on the scale, scope and nature of the product portfolio that is proposed to be offered from the ADGM. At a minimum, the FSRA would like to see the following appointments: Senior Executive Officer (SEO), Finance Officer (FO), Compliance Officer (CO), and Money-Laundering Reporting Officer. The last role can be combined with Compliance Officer role and one individual can carry out both responsibilities.

5.    Process and Timelines

The ADGM application process commences with formal introductions to the ADGM and the FSRA.

Following the introductory call, a short-form Regulatory Business Plan (RBP) has to be provided, along with financial projections, for a quick review by the regulator.

The comments of the FSRA are incorporated into the RBP, and a comprehensive application is compiled, comprising policies, processes and other related documentation. The KYC and associated forms of all key individuals are also prepared for submissions.

The formal application is then sent across to the FSRA, who reviews the pack over a period of 7-10 business days, and then accepts it. The detailed review process then commences, and this can take anywhere between four to six weeks to complete.

The regulator maintains communication with the applicant at all times during the review, reverting with an initial review 2 weeks into the application, and then follow-up reviews thereafter. The FSRA also meets with the SEO, FO and CO/MLRO designates, and conducts a detailed interview with them.

An in-principle approval is issued in case the application is successful. The applicant then proceeds to satisfy the in-principle conditions, and this involves the setting up of a legal structure under ADGM, opening a bank account, and depositing the share capital in the account. Other tasks include finalization of auditors and obtaining professional indemnity insurance for the firm.

Once done, a final submission is made to the FSRA, following which the regulator issues the Financial Service Permissions and the process is then complete. The firm is now open for business.

Contact us today to learn how we can set up your fund management business in ADGM.

Disclaimer: The content on this page is for general information purposes only and does not constitute as legal advice nor should it be used as a basis for any specific action or decision. Nothing on this page is to be considered as creating a lawyer-client relationship or as rendering of legal advice or legal services for any specific matter. Users of this website are advised to seek specific legal advice from their lawyer or a legal counsel regarding any specific legal issues.

Download the Fund Management Company Setup in ADGM.