London hedge funds are joining a trend of investment firms looking towards Dubai for expansion, lured by lower tax rates, softer regulation, and a rising number of millionaires.
Millennium Management, ExodusPoint Capital Management and BlueCrest, have recently established a presence in Dubai. In March, All Blue Capital shifted its corporate headquarters from London to Dubai.
The public register of the Dubai International Financial Centre shows that UK hedge fund giant Brevan Howard successfully incorporated Brevan Howard Investment Products Ltd with the DIFC on 18 October. London-based Squarepoint Capital also registered with DIFC in June this year.
DIFC has made several improvements for hedge funds, according to a spokesperson, including a waiver of registration costs and a reduction in capital requirements.
“Roughly 15% of our wealth and asset management market are hedge funds. UK hedge funds comprise an important part of this business,” the DIFC spokesperson told Financial News.
Hedge funds worldwide are seeing opportunities in the growing number of wealthy residents in the region. According to a new report by London investment migration consultancy Henley & Partners, Dubai is on track to become one of the wealthiest cities in the world. The city report noted the number of millionaires in Dubai rose to 67,900 by mid-2022, making it the richest city in the Middle East and Africa. London-based hedge fund LMR Partners, which manages nearly $9.8bn, has secured a licence from Dubai International Financial Centre, Bloombergreported.
The UAE is set to attract a net inflow of 4,000 millionaires this year.
READ How one of London’s newest hedge funds might win big on rising rates
Wealth and asset management funds registered under DIFC have nearly $450bn in assets under management, the spokesperson added.
“We have also reduced the annual regulatory fees by 60% to 80% depending on the business model,” they added.
Other firms, such as London-based hedge fund Carrhae Capital, led by Aziz Faqir, are in process of acquiring licences to start operations.
“The Dubai office will be a branch and headquarters will remain in London,” Faqir told Financial News.
Balyasny Asset Management, a Chicago-based $17bn hedge fund that is planning to open a new office in Dubai by next year, said that the rising demand from existing and prospective portfolio managers is one of the biggest reasons behind the firm’s decision to open an office in Dubai, Bloombergreported.
“We are attracting portfolio managers who are excited to live here, grow teams around them, and take advantage of our growing ecosystem,” DIFC’s spokesperson said.
Portfolio managers also welcome the lower corporate and income tax rates amid soaring global inflation, which is ramping up the wider cost of doing business.
“The lower tax rate is certainly a big reason for hedge funds opting for Dubai over other locations. For portfolio managers, few are getting really big years in terms of returns and it can make a massive impact on personal wealth,” a Dubai-based senior portfolio manager who recently shifted to the city told FN.
To contact the author of this story with feedback or news, email Bilal Jafar