Abu Dhabi is rapidly establishing itself as a premier destination for global hedge funds, drawing some of the world’s leading talent in the sector. Firms are increasingly choosing to set up here for a range of compelling reasons, including a favourable tax environment, access to new markets, and the city’s strategic location. As a result, it is safe to assume that the global financial landscape is beginning to recognise Abu Dhabi as a major player. In this blog, we explore the key factors driving the relocation of hedge funds to Abu Dhabi.
Efficient Tax Laws
For those who are employed in traditional financial centres such as London, New York and Singapore, they can expect to see a certain percentage of their salary deducted each month for income tax.
In London, that figure stands at 40% for those who earn between £50,271 and £125,140, and 45% for anyone who earns more than that. In New York, rates gradually increase depending on your tax band, with those making above $25 million (on top of a base of $2,509,929) expecting to pay 10.9%. Singapore operates a similar incremental system, with those at the top – who earn more than $1 million – being taxed at 24%, resulting in a total of $199,150 for the first $1 million plus additional tax on excess income.
In Abu Dhabi, that figure is 0%, no matter your income.
Given this disparity, it is not surprising that many hedge fund managers, who traditionally fall into the higher tax bands, are becoming increasingly attracted by the favourable tax incentives on offer in Abu Dhabi. Many hedge funds have lost talented recruits to firms that operate in the Emirati capital in recent times, which has prompted them to act – opening their own branches in the city to stem the flow.
Also Read: Why Invest in Abu Dhabi?
A Robust Regulatory Environment
Hedge funds – and any other financial institution operating within the city – are regulated by Abu Dhabi Global Market (ADGM), which provides a comprehensive regulatory framework designed to instil confidence in those who are bringing capital into the market.
This modern financial ecosystem provides a range of key functions and operates under English common law, which helps to provide a transparent and impartial legal environment – the perfect conditions in which hedge funds can thrive. ADGM also serves as a financial services hub, offering a comprehensive framework for banking, asset management, wealth management, and investment banking. In addition, the free zone facilitates company setup for new hedge funds through streamlined fund registration and licensing processes.
While it primarily functions as a space which assists financial institutions, ADGM also supports innovation, with a range of specific initiatives and frameworks to support digital assets, fintech and AI development – sectors which are becoming increasingly interesting to many hedge funds.
Where East and West Converge
Abu Dhabi is strategically positioned in the middle of the world’s key financial markets, such as New York and London in the west and Singapore and Tokyo in the east. This location, at the crossroads of Europe, Asia and the Middle East, functions as the ideal location for global investment strategies.
At the start of the business day in Abu Dhabi, the eastern markets remain open for several hours. With Tokyo five hours ahead, there are at least four hours of overlapping business between the two regions. By contrast, Abu Dhabi is three to four hours ahead of London (depending on the time of year) and eight to nine hours ahead of New York City, allowing time-sensitive transactions to be completed in the same day across these major financial centres. This is the ideal scenario for a hedge fund setting up outside the world’s traditional financial markets.
Abu Dhabi also provides easy access to emerging markets in the GCC, North Africa and South Asia – markets which are expected to experience significant economic growth in the coming years, offering hedge funds and investors abundant opportunities for expansion and diversification.
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Political and Economic Stability
The UAE’s political landscape has supported the growth of an economy that was already relatively strong, thanks to the oil sector, while also fostering diversification into finance, technology, and other high-value industries. Throughout the country’s rapid development, political and economic stability have gone hand-in-hand, each reinforcing the other. That remains the case today.
Abu Dhabi, as the seat of the national government and the wealthiest emirate, is the source of the stability for which the UAE has become known. The government maintains an open diplomatic approach and has established substantial trading partnerships with many of the world’s major economies, reinforcing its reputation as a secure environment for business. This diverse economy is further supported by a strong rule of law, providing hedge funds with confidence when managing substantial capital on a daily basis.
The city is also home to one of the world’s largest sovereign wealth funds, alongside a growing community of ultra-high-net-worth individuals. Together, they create an ideal financial ecosystem for hedge funds, which can access these substantial sources of capital by presenting compelling investment opportunities.
When combined with the pro-business regulations the city offers, all of these factors position Abu Dhabi as a key global hub for financial services and investment, and a highly attractive prospect for the world’s biggest hedge funds, who are primarily looking for capital protection and long-term growth.
Quality of Life and Infrastructure
In recent years, Abu Dhabi has been a magnet for global finance professionals with competitive salaries and an attractive tax environment. However, this isn’t the only thing it offers.
The city boasts a quality of life available in few other destinations around the world, with access to top-class sporting events – such as the Abu Dhabi Grand Prix – and cultural landmarks like Louvre and Guggenheim Abu Dhabi, located within Saadiyat Island’s Cultural District.
A range of top-class private international schools is highly attractive for hedge fund managers who may be relocating with families, while access to world-class healthcare is another defining factor.
Abu Dhabi is also home to a number of five-star hotels, such as Four Seasons Hotel Abu Dhabi at Al Maryah Island, which house exceptional restaurants like the Michelin-starred 99 Sushi Bar. Outstanding beaches and beach resorts are also a big draw, in addition to upscale retail offerings like The Galleria on Al Maryah Island.
Modern infrastructure positions the city as an attractive destination for hedge funds. Abu Dhabi is ideally placed should business need to be conducted in-person in any of the world’s most important financial centres, while the city also boasts exceptional infrastructure on a more local level – from state-of-the-art office spaces to world-class digital connectivity and amenities that support a high standard of living. The city is also well served by a number of highways, placing all of the most important neighbourhoods within 30 minutes, while neighbouring Dubai is just an hour away.
Also Read: Moving to Abu Dhabi from the UK
Diversification and Innovation
Abu Dhabi’s move towards economic diversification and innovation represents a highly attractive proposition for hedge funds, who are increasingly looking beyond traditional markets as a way to expand. The UAE’s evolution into sectors like renewable energy, fintech and AI-based technologies provides hedge fund managers with attractive new opportunities and, more importantly, access to potential high-growth industries.
This, in turn, facilitates the growth of more resilient, multi-sector portfolios which benefit from the aforementioned stability of a stable economy which is actively moving away from its reliance on oil.
The city’s commitment to innovation is another key factor. Progressive initiatives in areas like green technology are opening the door for hedge funds to focus on emerging technologies as a way to capitalise on the global shift towards sustainability.
Abu Dhabi’s rise as a global financial centre is no coincidence. It forms part of a deliberate government strategy to diversify the economy, supported by political stability, a favourable tax environment, and a strategic geographic position. These factors have combined to create a modern business landscape ideally suited to sophisticated investment activity. When coupled with the city’s world-class infrastructure, transparent regulatory framework, and access to some of the deepest capital pools in the world, it becomes clear that Abu Dhabi’s position as a financial powerhouse is here to stay.
