Where to Set Up a Fund Manager in the UAE

Three regulators, three regimes, and the choice determines everything from capital to jurisdiction

The UAE has no single fund management licence. A fund manager's regulatory pathway depends on where the management entity is incorporated: DIFC (regulated by the DFSA), ADGM (regulated by the FSRA), or the UAE mainland (regulated by the Capital Market Authority, which replaced the Securities and Commodities Authority on 1 January 2026). Each regime applies different capital requirements, governance standards, fund structures, and marketing rules. Choosing the wrong jurisdiction can lock a manager into higher costs, a narrower investor base, or a regulatory framework that does not accommodate its strategy.

• DIFC fund managers require a Category 3C licence from the DFSA. The base capital requirement is USD 70,000 for managers of Public Funds and USD 70,000 for Exempt Funds/Qualified Investor Funds, subject to an expenditure-based capital calculation that may push the actual requirement higher. The DFSA offers a fast-track process for fund manager applications.
• ADGM fund managers require a Financial Services Permission from the FSRA authorising the regulated activity of "Managing a Collective Investment Fund." The base capital requirement is USD 50,000 for managers of Exempt or Qualified Investor Funds. The FSRA's Consultation Paper No. 12 of 2025 proposes a lighter regime for smaller managers (under USD 200 million committed capital) and institutional-only managers.
• Mainland fund managers now require a licence from the CMA (Capital Market Authority), established under Federal Decree-Law No. 32 of 2025. The CMA succeeded the SCA on 1 January 2026. The CMA regulates all securities-related activity in the UAE outside DIFC and ADGM, including fund management, asset management, and fund distribution.
• Foreign fund managers can operate in DIFC or ADGM without a full licence in certain circumstances, by appointing a local fund administrator or trustee and registering as an External Fund Manager. The mainland does not offer an equivalent pathway.

Who this applies to

This article is for investment management firms, private equity sponsors, venture capital firms, hedge fund managers, family offices launching pooled vehicles, and institutional asset managers that want to establish or relocate fund management operations to the UAE. It also applies to financial services lawyers advising on structuring and licensing.

If you are raising capital through a fund offering, the prospectus and private placement rules that apply depend on the same jurisdictional choice. Our article on capital raising in the UAE under the 2026 CMA regime covers the disclosure and offering requirements across all three regulators.

The three regulatory regimes

DIFC: DFSA Category 3C

The Dubai International Financial Centre is the most established fund domicile in the UAE. The DFSA regulates fund managers under a tiered category system. Fund management falls under Category 3C, which authorises the regulated activity of "Managing a Collective Investment Fund."

A Category 3C licence also includes the right to manage assets (discretionary portfolio management) in respect of the fund. A fund manager that also wants to provide standalone discretionary portfolio management services to separate accounts needs to confirm that the scope of its permissions covers this activity, which may require a broader application.

Capital requirements. The DFSA applies three components: base capital, risk-based capital, and expenditure-based capital. The actual requirement is the highest of the three. The base capital floor is USD 70,000 for managers of Exempt Funds and Qualified Investor Funds, and USD 140,000 for managers of Public Funds. The expenditure-based component is 18/52 of annual audited operating expenditure where the manager holds or controls client money (13/52 where it does not). For a manager with USD 1 million in annual operating costs, the expenditure-based component alone would exceed USD 346,000. DFSA prudential amendments taking effect from 1 July 2026 may adjust these calculations.

Key personnel. The DFSA expects a Senior Executive Officer (ordinarily resident in the UAE), a Finance Officer, a Compliance Officer, a Money Laundering Reporting Officer, and an independent Board with at least one non-executive director as Chair. In group structures, the Finance Officer and some risk functions can be drawn from the parent entity.

Fund types. DIFC funds are classified as Public Funds (retail), Exempt Funds (professional clients, minimum subscription USD 50,000), and Qualified Investor Funds (professional clients, minimum subscription USD 500,000 or assessed as a QIF investor). Most institutional managers use Exempt Funds or QIFs, which benefit from lighter disclosure requirements.

Fund vehicles. Investment Companies (the most common), Investment Trusts (used for property funds), and Investment Partnerships (used for PE, VC, and hedge funds). The DIFC also supports Protected Cell Companies and Incorporated Cell Companies for umbrella fund structures.

External Fund Manager route. A fund manager licensed in an acceptable jurisdiction can establish and manage a DIFC-domiciled fund without obtaining a DFSA licence, provided it appoints a DFSA-licensed Fund Administrator or Trustee who acts as local agent, maintains the unitholder register, and makes the prospectus available to investors. This route is used by established managers that want DIFC fund vehicles without relocating their management function.

For a broader overview of DIFC structuring, costs, and the 2026 regulatory changes, see our DIFC business setup guide.

ADGM: FSRA Financial Services Permission

The Abu Dhabi Global Market has positioned itself as a competitor to DIFC for fund formation, with a particular focus on private equity, venture capital, and digital asset funds. The FSRA regulates fund managers under its Financial Services and Markets Regulations.

A fund manager in ADGM needs a Financial Services Permission authorising "Managing a Collective Investment Fund" and "Managing Assets." The FSRA uses the same Category 3C designation as the DFSA.

Capital requirements. The base capital requirement is USD 50,000 for managers of Exempt Funds or Qualified Investor Funds. The expenditure-based component is 13/52 of annual audited expenses. The actual capital requirement is the higher of base capital and expenditure-based capital. Capital waivers may be available for branches of regulated financial institutions from recognised jurisdictions.

Proposed reforms (Consultation Paper No. 12 of 2025). The FSRA published a consultation in November 2025 proposing two new streamlined categories. Small Threshold Fund Managers (STFMs), managing less than USD 200 million in committed capital, would be subject only to the fixed USD 50,000 base capital requirement with no expenditure-based component. Institutional Fund Managers (IFMs), managing funds exclusively for institutional investors, would benefit from reduced governance and reporting requirements. These proposals align with the approach taken under the EU's AIFMD for sub-threshold managers. If adopted, these changes will make ADGM more accessible to emerging managers and reduce the cost of entry.

Key personnel. The FSRA requires a Licensed Director or Partner, a Senior Executive Officer (UAE-resident), a Finance Officer, a Compliance Officer, and a Money Laundering Reporting Officer. Some roles can be outsourced or drawn from group entities, subject to FSRA approval.

Fund types. Public Funds (retail), Exempt Funds (professional clients), and Qualified Investor Funds (professional clients with enhanced qualification criteria). Venture Capital Fund Managers benefit from a lighter regulatory track.

Fund vehicles. Limited Partnerships (the most common for PE and VC), Investment Companies, and Investment Trusts. ADGM SPVs are widely used to hold individual portfolio investments beneath the fund.

Foreign Fund Manager route. Similar to DIFC, a foreign fund manager from an acceptable jurisdiction can domicile a fund in ADGM without obtaining an FSRA licence, provided it appoints an ADGM-based Fund Administrator and meets the FSRA's oversight requirements.

Tax advantages. ADGM offers a 0% corporate tax exemption on qualifying income until 2063, no foreign ownership restrictions, no withholding taxes, and access to the UAE's network of over 80 double tax treaties. These features make ADGM competitive against Ireland, Luxembourg, and the Cayman Islands for fund SPV structuring.

Mainland: Capital Market Authority (CMA)

Until 31 December 2025, mainland fund management was regulated by the Securities and Commodities Authority (SCA). On 1 January 2026, Federal Decree-Law No. 32 of 2025 established the Capital Market Authority (CMA) as the SCA's successor. Federal Decree-Law No. 33 of 2025 sets out the substantive regulatory framework for capital markets, including fund management and asset management.

The CMA regulates all securities-related activity in the UAE outside DIFC and ADGM. A mainland fund manager needs a CMA licence for the regulated activity of managing collective investment schemes. The SCA Rulebook (Decision No. 13/RM/2021, as amended) remains in effect until the CMA issues replacement implementing regulations.

Key differences from DIFC and ADGM. The mainland operates under UAE federal civil law, not English common law. Fund structures, corporate governance, and dispute resolution all follow the federal framework. The DIFC and ADGM Courts (which apply English common law) are not available for mainland fund disputes unless the parties have contractually submitted to those jurisdictions.

Capital requirements. The CMA's capital requirements for fund managers are set in the SCA Rulebook and depend on the type of licensed activity. Fund management licences carry higher capital thresholds than advisory-only licences, and the CMA may impose additional conditions based on the applicant's business plan.

Governance and compliance. The CMA requires institutional-grade governance, including an independent compliance and risk function, a fit-and-proper board, AML/CFT policies, and ongoing reporting. CMA-licensed firms must file regular returns and submit to supervisory reviews.

No External Fund Manager route. The mainland does not offer a pathway comparable to the DIFC or ADGM External Fund Manager regime. A foreign fund manager that wants to manage funds from the UAE mainland must obtain a CMA licence.

When is the mainland route appropriate? The mainland is relevant for fund managers that need to distribute to retail investors across the UAE (outside the financial free zones), that manage funds investing in mainland-listed securities, or that operate as part of a group already licensed by the CMA. For most international fund sponsors, DIFC or ADGM will be the preferred jurisdiction.

Comparison table

Marketing funds in and from the UAE

The ability to market a fund to investors in the UAE depends on where the fund is domiciled, where the manager is licensed, and who the target investors are.

DIFC-domiciled funds can be marketed to DIFC-based investors under DFSA rules. A passporting regime allows DIFC fund managers to register their funds for marketing in ADGM and vice versa. Marketing to mainland investors outside DIFC requires compliance with CMA rules on foreign fund distribution.

ADGM-domiciled funds follow the same cross-recognition framework with DIFC. The FSRA requires all funds marketed in or from ADGM to be authorised or recognised.

Foreign funds can be marketed in DIFC and ADGM if they meet the relevant regulator's requirements for recognition of foreign funds. The fund's prospectus must comply with DFSA or FSRA disclosure standards. Marketing foreign funds to mainland investors requires CMA approval.

Reverse solicitation is not codified in UAE law and is not a reliable basis for fund marketing. Managers relying on inbound investor interest without a proper marketing framework risk breaching the regulatory perimeter.

Family offices and single-investor vehicles

Family offices that manage assets only for a single family may not need a fund management licence if they do not pool third-party capital. Both DIFC and ADGM offer family office structures that sit outside the fund management licensing perimeter. The DIFC's Single Family Office regime and ADGM's equivalent allow families to manage their own wealth without DFSA or FSRA authorisation.

The line shifts when a family office begins managing capital for third parties, co-investors, or co-investment vehicles. At that point, the activity crosses into regulated territory and a fund management licence is required. For more on family office structuring, see our DIFC family office setup guide.

What fund managers should do next

Fund managers considering the UAE should take the following steps:

• Determine whether the strategy is best served by DIFC, ADGM, or the mainland. The answer depends on fund type, target investors, asset class, tax considerations, and whether the manager needs English common law courts.
• Model the capital requirement under each regime before committing. The expenditure-based component can push actual capital well above the published base figures, particularly for DIFC managers with significant operating costs.
• Track the ADGM STFM and IFM proposals. If adopted, the lighter regime for smaller and institutional-only managers could shift the cost-benefit analysis in ADGM's favour for emerging managers.
• Assess whether the External Fund Manager route is viable. For established managers that want a UAE-domiciled fund without relocating the full management function, the EFM pathway in DIFC or ADGM can reduce licensing cost and staffing requirements.
• Build CMA transition planning into any mainland strategy. The SCA Rulebook remains in force, but implementing regulations under the new CMA framework (Federal Decree-Laws No. 32 and 33 of 2025) are expected. Existing SCA-licensed firms do not need new licences, but should monitor regulatory changes.
• Factor in marketing restrictions. A licence in one jurisdiction does not automatically permit marketing to investors in another. Cross-jurisdiction distribution requires separate analysis of each regulator's rules.

How should fund managers approach UAE licensing in 2026?

The UAE fund management licensing landscape is more fragmented than in single-regulator jurisdictions like the UK or Singapore. The three-regulator structure gives managers a choice, but that choice comes with trade-offs in capital, governance, legal system, tax, and distribution reach. The 2026 CMA transition adds a layer of uncertainty on the mainland side, while the ADGM's proposed reforms for smaller managers could reshape the competitive position of the two financial free zones.

For fund sponsors, asset managers, and family offices planning a UAE vehicle, the structuring decision should be made before the licence application begins. Changing jurisdiction after incorporation is expensive and disruptive. Getting the regulatory architecture right at the outset is the single most consequential decision in the process.

For fund managers evaluating licensing options across DIFC, ADGM, and the mainland, our financial services team advises on jurisdiction selection, licence applications, fund structuring, and ongoing regulatory compliance.

‍