New hedge fund hot spot? Dubai draws more finance companies

After attracting crypto firms, property investors and Russian billionaires, Dubai is drawing a new crowd: Hedge fund managers.   Izzy Englander’s Millennium Management has grown its staff in the Dubai International Financial Centre to about 30 since securing a licence in 2020. Michael Gelband’s ExodusPoint Capital Management, one of the largest multi-strategy hedge funds in the world, registered in the DIFC in June, according to a filing.

  All Blue Capital ditched its London headquarters to base itself in the city, where it now has almost half its global staff. Michael Platt’s private investment firm BlueCrest Capital Management is also expanding in the emirate, with former Citadel money manager Chris Wheeler among those hired. They are part of a growing clutch of firms choosing to expand in the sun-splashed business hub.

Brexit has spurred many funds to seek new bases outside the City of London, while some traders have fled Hong Kong’s strict Covid restrictions. And with living costs soaring around the world, Dubai’s tax-free welcome mat has seldom looked so appealing. “We are in a unique situation where the classic financial centres are disintegrating,” said Tom Kirchmaier, professor at the Centre for Economic Performance at the London School of Economics.

“Living in Dubai – that’s now come down to personal preferences with low taxes, good infrastructure and low regulation. ” For fund managers making the move, the city offers a fertile ground of high net worth individuals and institutional investors. The United Arab Emirates is set to attract a net inflow of 4,000 millionaires this year, the most of any country globally, according to consultancy Henley & Partners.

  Higher oil prices are another draw. Crude above $100 a barrel is buoying Gulf economies and markets, prompting the region’s sovereign wealth funds to invest the windfall at home and abroad.  “It’s not a coincidence that you have a lot of asset managers and hedge funds and other institutional investors that actually moved or set up offices in the region here,” Arshad Ghafur, Bank of America’s president for the Middle East and North Africa, said at DIFC Fintech Week.

“That’s to really capitalise on what’s happening here. ” Dubai’s current effort to attract financiers isn’t its first. Private bank Mirabaud in 2008 predicted a regional hedge fund boom that failed to materialise after the financial crisis took its toll on the industry and a series of scandals damaged the UAE’s regulatory reputation.

Some hedge funds have come and gone. Argent Financial Group received a license to operate in the DIFC in 2006 but withdrew three years later. DE Shaw set up in the emirate in 2009 but has since left.

  The latest push includes a fresh slate of inducements. The Dubai International Financial Centre is offering reduced licensing fees and capital requirements for hedge funds domiciling a domestic fund.   Firms within the centre manage around $450bn worth of assets, according to DIFC Authority CEO Arif Amiri.

A team from the business hub recently completed a roadshow in San Francisco and New York to attract more firms. “In our recent US roadshow, we engaged with some of the largest hedge funds in the world,’’ Amiri said. “The pandemic broke the conceptual relationship between `what’ you do and ‘where’ you do it.

Once this occurred, cities like Dubai became exceptionally competitive globally. ’’ The incentives appear to be having an impact even as other cities, including Paris, also try to lure traders. Millennium, which has about $55bn assets under management, is actively looking to further grow its presence in Dubai, according to people with knowledge of the matter.

It has hired Dean Cooper from UBS Group AG, who will move to Dubai from London as the firm expands its emerging markets operations there, people familiar with the matter have said. BlueCrest, which runs Platt’s wealth and that of his partners, is expanding to have 10 people, including at least three portfolio managers, according to people with knowledge of the matter. The firm plans to open an office in the financial district and trade imminently, said the people, who asked not to be identified because the details are private.

  London-based Carrhae Capital, an equity hedge fund, is in the process of opening an office in Dubai and currently seeking regulatory approvals, according to a person with knowledge of the matter. The firm, which manages about $800mn, will be moving two investment professionals to the city and the decision is primarily driven by the time zone advantage the firm will get for its emerging markets focused research and trading, the person added. Dubai in recent months has been taking steps to attract foreign talent just as rigid Covid-19 rules and the increasing influence of mainland China lessens the appeal of Hong Kong, which has lost thousands of professionals to other centres.

“It makes sense with lockdowns in Asia that financial centres like Dubai are becoming a destination for hedge funds,” said Whitney Baker, the New York-based founder of Totem Macro and former head of emerging markets at Bridgewater Associates. The Hong Kong Investment Funds Association, which represents firms with more than $52tn in assets under management, last month called for the city to scrap quarantine rules for travellers and open up to the rest of the world to restore its status as an international financial centre.   Stricter visa requirements, hiring restrictions and other bureaucratic road blocks are also limiting Singapore’s appeal to money managers.

The country has also made it harder for rich foreigners to create family offices, raising the minimum bar for local assets under management and other conditions to get key tax concessions. .