The Evolution of Fund Domiciliation in the Abu Dhabi Global Market

The global asset management landscape is undergoing a profound structural transformation, characterised by a pivot toward “mid-shore” jurisdictions that offer a balance of robust regulatory oversight and sophisticated corporate flexibility. Within this competitive milieu, the Abu Dhabi Global Market (ADGM) has emerged not merely as a regional alternative but as a preeminent global nexus for deploying institutional capital.

Established as a financial free zone under Abu Dhabi Law No. 4 of 2013, the ADGM has distinguished itself through a radical legal experiment: the direct application of English common law and equitable principles, subject to ADGM legislation and judicial interpretation. As of the 2024-2025 period, this legislative foundation has catalysed an unprecedented growth trajectory, with Assets Under Management (AUM) surging by triple digits, anchored by a regulatory philosophy that prioritises functional outcomes over prescriptive rigidity.

This article analyses the ADGM’s funds ecosystem, delineating the technicalities of its legal transplant, the mechanics of its specialised regimes in private credit and digital assets, and the procedural imperatives for establishing fund management entities within its jurisdiction.

The Jurisdictional Thesis: Direct Application as a Catalyst for Capital

The ADGM’s ascendancy as the self-styled “Capital of Capital” is fundamentally rooted in its unique legal architecture. While other regional financial centres have developed independent common law systems derived from foreign models, ADGM applies English common law, including the principles and rules of equity, subject to ADGM legislation. This distinction is codified in the Application of English Law Regulations 2015, which provides for the application of English common law and equitable principles as they stand from time to time, insofar as they are applicable and subject to ADGM legislation.

The implications for fund managers and institutional investors are significant. Legal certainty is the primary currency of global finance, and by anchoring its commercial and civil law in English common‑law principles and persuasive English jurisprudence, the ADGM provides a predictable environment for complex contract enforcement, fiduciary duties, and the protection of proprietary rights.

A landmark development in this regard occurred on 17 November 2023, when the ADGM Court of Appeal in AC Network Holding Ltd. v. Polymath Ekar SPV1 confirmed that the doctrine of precedent applies within the ADGM court hierarchy. This ruling reinforces the structured application of common‑law reasoning within the ADGM legal framework, ensuring strong persuasive alignment with English jurisprudence while preserving the autonomy of the ADGM courts.

Competitive Positioning: ADGM vs. Global Benchmarks

The ADGM’s competitive positioning is further strengthened by its physical expansion. The inclusion of Al Reem Island in the jurisdiction in 2023 effectively created one of the world’s largest regulated financial districts, expanding the land area to 14 million square meters and providing the infrastructure necessary for the next decade of institutional growth.

The Asset Management Ecosystem: 2024-2025 Performance Metrics

The growth rate in ADGM’s asset management sector has outpaced that of most other international financial centres in the post-pandemic era. Between 2015 and 2024, ADGM reported significant compounded growth in assets under management. In 2024, ADGM reported a substantial year‑on‑year increase in assets under management, a performance that continued into 2025, with strong growth reported.

Market Composition and Major Players

By mid-2025, the ADGM had reached critical mass, with 161 asset and fund managers overseeing 220 registered funds. This institutional cohort includes global leaders who have increasingly chosen Abu Dhabi as their regional headquarters. Notable establishments and expansions in 2024-2025 include:

• BlackRock: Launched a regional hub and an AI-native reinsurance platform with IHC and Lunate.
• Morgan Stanley and SS&C Financial Services: Established a significant operational presence in 2024.
• Nuveen: US-based manager currently managing between USD 3 billion and USD 5 billion from the centre, with projections to double this AUM by 2028.
• General Atlantic and SS&C: Part of a wave of leading firms that set up in 2024 to tap into Abu Dhabi’s multi‑trillion‑dollar sovereign wealth ecosystem.

ADGM‑registered and ADGM‑originated structures contribute materially to the market capitalisation of entities listed on the Abu Dhabi Securities Exchange (ADX).

Operational Scaling and Workforce

The expansion of the jurisdiction has been mirrored by a surge in human capital. The workforce within ADGM’s expanded jurisdiction, comprising the Al Maryah and Al Reem Islands, rose to 39,870 by Q3 2025, reflecting a significant increase in the number of professionals dedicated to financial and legal services. This growth is supported by the ADGM Academy, which created over 900 job placements for UAE nationals in the first half of 2025, ensuring a sustainable talent pipeline for the industry.

The Collective Investment Fund Framework: Classification and Structure

The ADGM’s regulatory body, the Financial Services Regulatory Authority (FSRA), maintains a highly differentiated fund regime defined by the FUNDS Rulebook. This framework accommodates a broad spectrum of strategies, from traditional long-only equity funds to sophisticated private market vehicles.

Fund Classifications and Investor Thresholds

The FSRA categorises Domestic Funds based on investor sophistication, which determines the intensity of regulatory oversight.

A key differentiator of the ADGM Exempt Fund is its relatively low minimum investment of USD 50,000, providing an efficient entry point for family offices and high-net-worth individuals who have not yet met the institutional threshold for a QIF.

The Variable Capital Company (VCC): Structural Paradigms

Introduced via the Variable Capital Companies Regulations 2020, the VCC has become the preferred vehicle for sophisticated fund managers. The VCC is a body corporate that exists solely to carry on the business of one or more collective investment schemes.

The structural benefits of the ADGM VCC are categorised into three operational pillars:

1. Variable Share Capital: Unlike traditional companies, the paid-up capital of a VCC is at all times equal to its net asset value. This enables the issuance and redemption of shares at NAV without the standard capital-reduction procedures or solvency tests associated with traditional corporate forms.
2. Statutory Segregation (Umbrella Structure): A VCC can be established as a single standalone fund or as an umbrella entity with multiple sub-funds. Crucially, the assets and liabilities of each sub-fund are legally segregated. This statutory ring-fencing ensures that if one sub-fund becomes insolvent, its creditors cannot seek recourse against the assets of another sub-fund or the umbrella company itself.
3. Privacy and Disclosure Exemptions: The member register of a VCC is not open to public inspection, and financial statements are not required to be made public, ensuring a high degree of confidentiality for private placement funds.

Technical analysis of the VCC regime indicates that an umbrella structure provides significant cost efficiencies, as the sub-funds can share a common board of directors, fund manager, and administrative service providers.

The Procedural Lifecycle: Setting Up a Fund Management Company (Category 3C)

To manage funds in the ADGM, a firm must secure a Financial Services Permission (FSP) from the FSRA. Most asset managers apply under Category 3C, which permits the management of third-party assets and collective investment funds without the firm holding client assets directly on its own balance sheet.

The Authorisation Process

The authorisation process for a Category 3C firm is a relationship-managed journey that emphasises the quality and experience of the management team.

1. The Strategy Call and Pre-Application Meeting: Promoters engage with the FSRA Fintech and Authorisation division to review the proposed business model, investment strategy, and target investor profile.
2. Submission of the Regulatory Business Plan (RBP): A comprehensive document detailing the firm’s governance structure, risk management framework, AML/KYC policies, and financial projections.
3. In-Principle Approval (IPA): Upon successful review, the FSRA issues an IPA, which serves as a conditional license. This enables the promoters to finalise the corporate setup.
4. Operational Implementation: The firm must register its legal entity with the Registration Authority, lease physical office space (minimum 8 sqm per employee), open a bank account, and deposit the required regulatory capital.
5. Final FSP Issuance: Once the IPA conditions are met, including the appointment of approved individuals (SEO, FO, CO/MLRO) and the procurement of Professional Indemnity Insurance, the FSRA grants the final Financial Services Permission.

Recalibration of Capital Requirements (August 2025 Amendments)

The ADGM’s prudential framework underwent a significant evolution in August 2025 to increase proportionality for lower-risk firms.

This recalibration reflects the FSRA’s intent to align capital requirements more closely with investment managers’ actual risk profiles, particularly those serving non-public funds. While the statutory minimum remains USD 250,000, firms must still notify the FSRA if their capital resources fall below 120% of the required amount, ensuring a continuous safety buffer.

Specialised Regimes I: The Private Credit Frontier

In response to the global withdrawal of traditional bank lending from middle-market companies, the ADGM issued its Private Credit Fund Rules on 4 May 2023. This framework allows ADGM-based collective investment funds to originate, purchase, and participate in credit facilities, providing an alternative financing avenue for SMEs.

Technical Guardrails for Private Credit

Given the inherent risks and limited liquidity associated with credit strategies, the FSRA has implemented specific operating restrictions.

• Fund Mechanics: A Private Credit Fund must be a closed-ended Domestic Fund categorised as either an Exempt Fund or a QIF. Venture Capital Funds are expressly prohibited from this category.
• Leverage and Borrowing: Use of leverage is strictly limited to 100% of the fund’s capital (1.0x NAV).
• Concentration Limits: To mitigate contagion risk, the fund’s maximum exposure to a single borrower or a group of connected borrowers is typically constrained by FSRA‑approved concentration limits, typically in the range of 20–25% of NAV, depending on strategy.
• Internal Controls: Managers must develop and adhere to a sound credit assessment and pricing methodology and conduct regular stress testing of the portfolio against principal market risk factors, including interest rates and credit spreads.

This regime exempts Private Credit Fund managers from the requirement to hold a specific permission for “Providing Credit” or “Arranging Credit,” provided they operate within the collective investment fund framework, subject to compliance with the collective investment fund framework and FSRA supervisory oversight.

Specialised Regimes II: Digital Assets and the Next Wave of Tokenisation

The ADGM has maintained a pioneering role in digital asset regulation since 2018, and in mid-2025, it updated its framework to address tokenisation and decentralised yield activities.

Fiat-Referenced Tokens and Virtual Asset Staking

The 2025 enhancements transitioned the jurisdiction from a rigid approval-based model to a functional, notification-oriented regime.

• Accepted Virtual Assets (AVA): Regulated firms can now perform self-assessments against pre-defined FSRA criteria to accept VAs for trading or custody, with a notification to the regulator replacing the previous case-by-case approval process.
• Stablecoin Governance: The FSRA finalised rules for Fiat-Referenced Tokens (FRTs) in October 2025, which address emerging business models and mandate risk-based requirements for issuers.
• Staking Activities: Consultation Paper No. 10 of 2025 proposed a dedicated framework for virtual asset staking. Under the proposal, Virtual Asset Managers may, subject to final rulemaking, be permitted to stake client virtual assets on a discretionary basis.

The 2025 updates also maintained restrictions on privacy‑enhancing tokens and certain algorithmic stablecoin models.

The 2025-2026 Modernisation: Proportionality and Institutional Growth

In late 2024 and 2025, the FSRA undertook a holistic review of its funds regime, culminating in Consultation Paper No. 12 of 2025, which proposes a suite of enhancements to maintain international competitiveness.

The Sub-Threshold Fund Manager (STFM) Framework

Under Consultation Paper No. 12 of 2025, the FSRA has proposed a Sub‑Threshold Fund Manager (STFM) category inspired by the EU’s AIFMD sub‑threshold regime.

• Proposed Eligibility: Managers with a maximum committed capital of USD 200 million across all funds.
• Proposed Governance Relief: STFMs would benefit from the elimination of the mandatory requirement to appoint a Finance Officer or an internal audit function.
• Proposed Capital Threshold: A reduced Base Capital Requirement of USD 50,000.

The Institutional Fund Manager (IFM) Framework

Under Consultation Paper No. 12 of 2025, the FSRA has proposed an Institutional Fund Manager (IFM) regime intended for managers serving exclusively sophisticated institutional unitholders.

• Proposed Eligibility: A minimum subscription threshold of USD 5 million, with a prohibition on natural persons as unitholders.
• Proposed Prudential Standards: IFMs would be subject to a higher of USD 50,000 BCR or 6/52 of annual audited expenditure, representing approximately half the expenditure-based capital required for full-scope managers.

Employee Investment Vehicles (EIVs)

Consultation Paper No. 12 of 2025 proposes introducing Employee Investment Vehicles (EIVs) to facilitate employee participation in private funds. Under the proposal, these vehicles would be excluded from the definition of a ‘Fund’ and exempted from minimum subscription requirements, provided participation is limited to staff directly involved in the investment process.

Conclusion: The Strategic Resilience of the ADGM Domicile

The performance of the Abu Dhabi Global Market through 2024 and 2025 confirms its transition from a regional free zone to a resilient global hub for asset management. By institutionalising the direct application of English common law, the ADGM has decoupled its legal certainty from local administrative shifts, providing a bedrock for multi-billion-dollar co-investment partnerships between global firms and Abu Dhabi’s sovereign wealth funds.

The ongoing recalibration of the prudential framework and the expansion into Al Reem Island demonstrate a regulatory authority that is both responsive to market feedback and proactive in addressing the complexities of modern finance. While the choice between jurisdictions like the DIFC and the ADGM continues to depend on specific allocator relationships and lifestyle preferences, the ADGM’s uncompromising stance on unmodified English common law and its avant-garde frameworks for private credit and digital assets ensure its continued status as a preferred premier destination for the world’s most sophisticated fund managers.

As the 2026 modernisation reforms take effect, the jurisdiction is poised to further consolidate its role as the dominant regional engine for capital formation and digital innovation.