Abu Dhabi’s Financial Ascent

Why ADGM is attracting world asset managers

Abu Dhabi is positioning itself as a serious hub for worldwide asset managers and hedge funds, difficult Dubai’s long-standing dominance within the area. The emirate at present ranks second within the Center East and Africa and thirty fifth globally on the World Financial Centres Index (GFCI 36).

Dubai Worldwide Financial Centre (DIFC) stays the Gulf area’s powerhouse; in 2024 alone, over 260 banking and capital market companies, 410 wealth and asset administration firms (together with 75 hedge funds), and 125 insurance coverage and reinsurance companies established workplaces there.

Abu Dhabi, the capital of the UAE, is closing the hole, nonetheless. On the coronary heart of this effort is Abu Dhabi World Market (ADGM), the emirate’s monetary free-zone. ADGM reported a powerful 245% progress in property underneath administration (AUM) in 2024, in comparison with 35% in 2023. It now hosts 134 asset and fund managers overseeing 166 funds. World monetary giants like Nuveen, PGIM, and Normal Atlantic have all established operations in Abu Dhabi, highlighting its rising attraction.

ADGM’s growth has propelled the monetary sector’s share of GDP within the emirate, which has expanded by a median 11% a 12 months during the last three years, says Justin Alexander, director of Khalij Economics and Gulf Cooperation Council (GCC) analyst for GlobalSource Companions. Whereas a few of this progress is because of the post-Covid rebound, 4 key elements make ADGM a compelling worldwide monetary middle, he argues.

“Firstly, is the convenience of multinational,” he says. “Second is a rising ecosystem of friends and companies: the community impact. Third is the placement inside world buying and selling time zones, filling a spot between Singapore/Hong Kong and Europe. And fourth is the standard of life in Abu Dhabi, which helps entice and retain world expertise.”

Strong Authorized And Regulatory Frameworks

Like DIFC, ADGM operates underneath English Widespread Regulation, which implies transparency and a well-recognized authorized framework for worldwide monetary companies.

“ADGM helps companies of all sizes,” a spokesperson says, “with a aggressive tax atmosphere with low to zero p.c tax on earnings and no restrictions on capital repatriation, cutting-edge digital infrastructure, and a plug-and-play ecosystem that simplifies the method of establishing and doing enterprise inside the jurisdiction.”

“The set-up course of was seamless and ADGM’s authorized and regulatory framework gives transparency and predictability, which appeals to world asset managers,” says Zia Uddin, president of Monroe Capital, a US-based funding supervisor that’s within the course of of creating a presence in ADGM. “Moreover, ADGM offers value efficiencies in comparison with different monetary hubs, making it notably enticing for start-ups and smaller companies.”

Whereas ADGM operates underneath laws like these DIFC adheres to in Dubai, it has better flexibility in some fund constructions, says Dounia Mansour, a Dubai-based companion at US regulation agency King & Spalding who advises worldwide companies on establishing in ADGM and DIFC.

“An ADGM fund supervisor can set up and handle a fund platform with out the requirement of a particular endorsement on their fund supervisor license,” she notes. “This streamlines the licensing course of and makes it extra versatile. Moreover, ADGM permits the creation of restricted partnerships with out authorized character, which can be, underneath sure circumstances, extra environment friendly from a tax perspective.”

ADGM’s Financial Providers Regulatory Authority has additional enhanced its attraction by making a progressive regulatory atmosphere that encourages innovation.

“ADGM leads in digital property and sustainable finance, providing progressive regulatory frameworks, together with the area’s first Sustainable Finance Regulatory Framework,” says a spokesperson. For instance, in December, it launched a complete framework for the issuance of fiat-referenced tokens (FRTs), broadening the vary of digital property out there in a regulated atmosphere.

Sovereign Wealth Connection

One in every of ADGM’s strongest promoting factors is its proximity to Abu Dhabi’s sovereign wealth funds. The emirate manages some $1.7 trillion in sovereign wealth property via establishments together with the Abu Dhabi Funding Authority (ADIA), Mubadala, and ADQ.

Within the first three quarters of final 12 months alone, these three funds invested $36 billion globally: two-thirds of all Persian Gulf and 26% of world sovereign fund investments positioned throughout that interval, in keeping with analysis agency World SWF.

“The existence of Abu Dhabi’s sovereign wealth funds, their robust reputations and their monitor file of funding actions, are all main incentives for funds to setup in Abu Dhabi or increase their presence,” says Robert Mogielnicki, senior resident scholar on the Arab Gulf States Institute in Washington.

Past its sovereign funds, Abu Dhabi is house to the Central Financial institution of the United Arab Emirates, influential UAE authorities our bodies and enterprise leaders, creating invaluable networking and partnership alternatives.

“Abu Dhabi would nonetheless be a pretty location whatever the federal entities that conduct enterprise there,” Monroe’s Uddin says, “but it surely actually permits us to keep up relationships extra simply with these organizations.”

A Chief In Sustainable Finance And Digital Belongings

ADGM is enjoying an energetic position within the UAE’s push for sustainable finance and innovation, keyed to its objective of reaching net-zero emissions by 2050.

“Sustainability is a core pillar of ADGM’s monetary ecosystem,” an ADGM spokesperson says. “We combine ESG [environmental, social, and governance] frameworks and progressive financing devices to help accountable investing.”

In 2019, ADGM launched its Sustainable Finance Agenda, constructed on 4 rules: regulation, consciousness, cooperation, and ecosystem. Three years later, it turned the primary jurisdiction globally to manage carbon credit and offsets as emission devices in addition to situation licenses for exchanges to function each spot and spinoff markets. In 2023, it launched a sustainable finance framework that features sustainability-labelled fund guidelines and obligatory ESG disclosures for listed firms.

ADGM can also be advancing in digital property and different investments, providing a regulatory framework geared to draw fintechs, hedge funds, and start-ups concerned in digital currencies and tokenized property.

Fintech companies together with Blockdaemon, Thndr, Tuum, Klub, Aspen Digital, and Symphony have all expanded into ADGM, reinforcing its place as a monetary innovation hub.

The freezone can also be house to HUB71, a world tech ecosystem connecting start-ups with buyers, authorities entities, and company companions.

Outgrowing Oil And Gasoline

Regardless of conspicuous progress, some specialists argue that ADGM nonetheless has work to do to basically reshape Abu Dhabi’s financial system for the longer term. In a number of methods, the emirate stays a typical Gulf power producer.

“[ADGM has been] key by way of monetary sector diversification and has helped entice overseas direct funding [FDI],” says Steffen Hertog, affiliate professor on the London Faculty of Economics and a Gulf specialist. “However I don’t assume it has but structurally modified the Abu Dhabi financial system, which stays dominated by the hydrocarbons sector and various giant state funds and state-owned enterprises.”

The third largest oil producer in OPEC, Abu Dhabi depends on hydrocarbons for round 50% of its GDP. As a key driver of the UAE financial system, it contributed 68% of the nation’s complete output in 2023. Below its Imaginative and prescient 2030 technique, the emirate is concentrated on diversifying and decarbonizing by investing in sectors like tourism, finance, and logistics.

“Abu Dhabi has made some vital progress on diversification, together with finance and manufacturing,” says Alexander. Nonetheless, “given the extent of its hydrocarbon wealth, it doesn’t actually have an enormous must diversify—from a fiscal perspective, at the very least. The dominance of state-owned enterprises would usually be seen as an issue in customary improvement economics, but it surely appears to work pretty nicely in Abu Dhabi.”

Nonetheless, the emirate is betting it may proceed positioning itself as a world funding hub.

To help this ambition, the UAE launched its Nationwide Funding Technique final November, concentrating on FDI progress to almost $600 billion by 2031. Aligned with the “We the UAE 2031” nationwide plan, which tasks doubling the nation’s GDP, the emirate goals to grow to be a world funding vacation spot by creating rising sectors and attracting top-tier expertise. ADGM is more likely to stay a key participant in supporting these efforts.