PC: Medium
Dubai’s fast growth in hedge funds is driving economic diversification in the UAE, as their efforts are pegged toward achieving the country’s national goals of positioning the city as a global financial hub.
According to Bas Kooijman, CEO and Asset Manager of DHF Capital, hedge funds in the sector in Dubai are becoming a growing part of the expansion of the economy of the UAE. In 2023, the Dubai International Financial Centre authorised ten new hedge funds, and the year-on-year growth rate of hedge fund managers opening in the region reached 125%.
Catalyst for the DIFC Funds Centre
It was at the same time a mushrooming of hedge funds that Kooijman perceived as a primary driver for launching the newly established DIFC Funds Centre. This centre marks another epoch of growth as part of Dubai’s wider financial ecosystem, and it is made special by its ability to host hedge funds.
Dubai already boasts more than 72,000 millionaires, and its wealth landscape is growing rapidly. Investment activity will most likely surge as high-net-worth individuals in the UAE grow by as much as 40% between 2021 and 2031, making Dubai a prime financial hub across the world.
A Magnet for Global Investors
Dubai is becoming a haven for hedge funds and thus attracting investors worldwide. With the DIFC Funds Centre, there has been a meeting of the rise in demand and continuous growth ambitions regarding the initiatives at national levels, such as the Dubai Economic Agenda (D33). According to Kooijman, huge international capital attracts funds to the region and thus benefiting the key sectors like real estate, technology, and infrastructure.
He added that such investments not only help in diversifying the economy but also play a vital role in job creation in high-value industries. Furthermore, sophisticated strategies of hedge funds enhance market efficiency, thus ensuring resilience of the financial system in alignment with Dubai’s ambition of becoming a global business and innovation hub under D33.
Enhancing Economic Diversification
Hedge funds are fast emerging as key movers in the diversification of the UAE’s economy, more particularly through innovations and investments in the new emerging sectors. In fact, today, the Middle East accounts for the highest proportion of sovereign wealth invested in hedge funds worldwide. The region accounts for a very minimal share of less than 1% of global hedge fund AUM but is expanding exponentially. The centre now serves as a base for thirteen of the world’s top 100 hedge funds, a testament to the growing profile of the sector.
Some 40 hedge funds launched in the region control at least $1 billion in assets, testifying to the enormous scale of the business in Dubai.
Q Regional Financial Powerhouse
Within a short period of just over a decade and a half, Dubai and DIFC have emerged as the premier investment hub and financial centre for the Middle East, Africa, and South Asia (MEASA). He believes that additional concentration of hedge fund activities will simply enhance the UAE’s stature of its financial ecosystem. Currently, DIFC is leading with 300 wealth and asset management firms and is the largest market within the region. There are also an additional 50 more companies registered at DIFC that are involved in hedge fund activities; almost 40 manage an AUM of more than $1 billion.
Outlook into the Future
The increased presence of hedge funds will continue to attract wealth, talent, and financial innovation to the UAE, in particular to Dubai. Hedge funds will be hailed as key contributors to further diversifying the economy as well as driving innovation and solidifying the UAE’s global financial position in the near future.
This extension, thus, integrates into the national agendas of Dubai, for example, the Dubai Economic Agenda (D33), emphasising Dubai’s strategic vision as a centre for global business and innovation. As hedge funds leave their mark, they are set to drive most of what the future of the UAE’s economy will shape.
