Why the UAE will become a hub for family offices – News

Thanks to a series of new reforms and legislation, many hedge funds, cryptocurrency companies, venture capital firms have established operations in the country

The UAE is increasingly becoming a hub for family offices, with some of the world’s biggest names setting up offices in the country to tap into a market that is set to reach AED 3.67 trillion in the next few years.

American billionaire investor and hedge fund manager Ray Dalio is one of the most prominent investors to have recently announced plans to open an office branch in the UAE capital.

The new office, located in Abu Dhabi Global Market, will have a team of experienced investment professionals to run the family office.

Globally, family offices have become multi-trillion dollar businesses, with major players influencing the strength of the industry. In many cases, these offices have become the de facto parking mechanism for UHNI wealth. There are an estimated 17,000 family offices worldwide with assets totaling US$10 trillion (AED36.7 trillion). Interestingly, about 25% of these assets are in the real estate industry.

A number of hedge funds, cryptocurrency firms and venture capital firms have recently established operations in the UAE as a host of new reforms and legislation have attracted new family offices and wealth managers.

Financial wealth in the UAE will grow by 20% in 2021, double the global growth rate of 11%, further strengthening its status as a safe haven for household wealth. A large portion of this wealth (approximately 41%) was created by ultra-high net worth individuals (UHNWI) and family offices. This share is expected to increase to 46% by 2026. The country’s financial wealth is expected to continue growing at a compound annual growth rate of 6.7 percent to reach US$1 trillion by 2026, up from US$700 billion (Dh2.57 trillion) in 2021.

Family businesses in the UAE play a key role in the economy as almost 60% of the country’s GDP growth is attributed to family businesses and 80% of the workforce. As such, the Family Business Center was established to provide the necessary support and resources needed to prosper both locally and internationally.

Recently, Edmond de Rothschild, EnTrust Global, Nomura Singapore Limited and The Family Office Company opened offices in the Dubai International Financial Center (DIFC).

The center (DIFC) has recently attracted a number of well-known companies, bringing the total number of wealth and asset management firms to over 300.

These companies represent a US$450 billion (AED1.65 trillion) industry. By the end of 2022, more than 150 funds have settled in the center.

With US$517 billion in wealth, DIFC is the largest city in the Middle East and attracts global and regional asset managers to set up offices.

“With the new regulations being enacted, Dubai is likely to witness a substantial transfer of wealth from other popular centers such as the US, Luxembourg, Singapore and Hong Kong. Asian family offices are particularly looking to move from here due to Dubai’s geostrategic location and investor-friendly laws. build and expand their base,” said Vijay Valecha, chief investment officer at Century Financial.

About 30% of Asian family offices manage more than US$1 billion in assets.

Valecha said the UAE has developed a growth strategy that sees itself as a global investment destination, and its clear business-friendly policies tend to attract talent, paving the way for global family offices to do business in the UAE.

“Over the past decade, the UAE has undertaken a series of legislative reforms to facilitate the smooth transfer of wealth and ownership of family assets and businesses. This included the release of trust and foundation legislation, followed by the DIFC and Abu Dhabi Global Market for non-Muslims. Create a will system,” he said.

Overall, according to Century Financial CIO, the UAE offers favorable tax policies, a stable and diversified economy, a strategic location, a business-friendly environment and a high quality of life, making it an increasingly popular location for family offices The destination hopes to expand its presence in the region.

According to Nimish Goel, partner at WTS Dhruva Consultants, the UAE is a preferred jurisdiction for setting up family offices, foundations and trusts for a number of reasons such as tax efficiency, a currency pegged to the US dollar, strong infrastructure and economic fundamentals , high growth-focused government, ease of setting up and running a business and legislative developments such as the establishment of a global family business and private wealth center in DIFC.

Denys Peleshok, head of Asia at CPT Markets, said the UAE is increasingly becoming an attractive destination for family offices due to its strong growth, political stability and security, and its ability to develop into a major global financial and economic centre.

“The UAE can offer the same set of services and the right environment that are unique to global cities like New York or London.

Over the past few years, the country has emerged as a bright spot while other countries have struggled economically. As a result, the UAE has been able to attract wealthy individuals and companies who are looking for a suitable and safe environment to grow and prosper,” he said.

According to Peleshok, the proactive approach of the UAE government has also played a big role in boosting traction, as founders often follow their companies when they set up shop in different jurisdictions.

“China also already has a large number of high-net-worth individuals, creating a vast market for wealth management firms and family offices. Its status as a financial center provides access to investment vehicles and financial services. Furthermore, compared to other jurisdictions, the UAE China’s tax regime is attractive and provides a more efficient environment for managing investments and optimizing costs,” he said, adding that access to a vibrant lifestyle is also an important factor for wealthy individuals and family offices, with Dubai and Abu Dhabi leading the way. This area presents important opportunities.