Dubai has rightfully earned the reputation of one of the world’s greatest financial powerhouses. It is a magnet for international fund managers and investors who are looking for an alternative to the more traditional economic hubs of the USA, UK, and across Asia. Its growth has been supported by a strong government focus on developing the financial sector and attracting international talent. It offers both investors and managers a large range of convincing benefits including a robust infrastructure, strategic location, and investor-friendly regulatory environment. In this guide we will offer you step-by-step guidance on how to start a hedge fund in Dubai in 2025.
Why Dubai is ideal for launching a hedge fund
There are many reasons why Dubai is ideal for launching a hedge fund. Here are 5 of them:
Prime location: Dubai is known for its superb geographical location at the crossroads of Africa, Asia, and Europe, providing easy access to multiple markets.
Clear regulations: The DFSA, FSRA and SCA all provide very clear operational frameworks.
Enhanced trust from investors: Investors feel comfortable placing their trust in Dubai-based funds thanks to its renowned banking infrastructure and financial regulations.
Tax advantages: Dubai offers 0% personal and capital gains tax in most sectors. Corporate tax is levied at 9% for taxable income above AED 375,000.
Easy access to top tier investors: High-net-worth individuals and companies looking for prolific investment opportunities are attracted to Dubai.
How to start a hedge fund in Dubai: Step-by-step
While starting a hedge fund in Dubai may sound daunting, it does not have to be. All you have to do is follow these simple steps:
Choose a legal entity
If you want to start a hedge fund in Dubai,the first thing you need to do is choose a legal entity. The majority of hedge funds are set up in free zones that attract international investors. The legal entity you choose will determine how the hedge fund is operated, regulatory requirements, and investor liability. Common options include LLCs, free zone companies, and private joint stock companies.
Meet capital requirements
If you want to start a hedge fund in Dubai you need to be able to show regulators that you are financially well-supported and that you can operate your hedge fund responsibly. The amount of capital you will require will depend on the jurisdiction and the type of hedge fund but will typically be AED 1,000,000 or more. Having sufficient capital will allow you to finance all your operational costs, meet regulatory requirements, and protect the best interests of your investors.
Appoint fund managers and auditors
When starting a hedge fund in Dubai you have to appoint qualified fund managers to not only boost investor trust but also guarantee skilled decision making. You will also need to appoint independent auditors for the verifications of financial statements and to ensure that the hedge fund remains compliant. All appointments have to be in line with the competency criteria set out by the relevant regulator.
Secure license
After you have chosen your legal entity and appointed your fund managers and auditors, you need to apply for a hedge fund license from the relevant regulator. This license will allow you to legally operate a financial business in Dubai. When applying for your license you will have to submit various documents that will be reviewed before your license is approved.
Open bank account
After your license application gets approved, you have to set up a corporate bank account to handle investor and operational funds. Select a bank that has some experience in the management of hedge funds and is able to offer you advice and assistance in simplifying your operations. To open a corporate bank account you will have to submit supporting documents such as your license, funding documents, and the identification documents of your shareholders (where applicable).
Maintain ongoing compliance
After establishing your hedge fund in Dubai, you have to remain compliant with all regulatory responsibilities. This includes:
• Filing regular financial reports
• Reporting to the DFSA/FSRA on a regular basis
• Maintaining updated client records
• Ensuring proper governance
Understanding hedge funds and how they operate in the UAE
Hedge funds are actively-managed private investment funds. Investor money is pooled and managed by professional fund managers to create a profit. While traditional investment funds are bound by several restrictions, hedge funds can invest money in stocks and bonds to currencies and commodities. In Dubai, hedge funds are usually registered in financial free zones such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). Many hedge funds in Dubai still operate under private placement rules which means that they aren’t marketed to the public but instead directly offered to high-net-worth, qualifying, or professional investors.
Legal structures and regulatory bodies you need to know
Here are the legal structures and regulatory bodies you need to be aware of when starting a hedge fund in Dubai.
DIFC and DFSA requirements
The DIFC is a global financial center with a robust legal system drawn from English common law. Hedge funds are regulated by the Dubai Financial Services Authority (DFSA).
Types of funds are:
- Public Funds – retail investors qualify. There are rigorous reporting requirements.
- Exempt Funds – professional investor private placement, minimum investment USD 50,000, max 100 investors.
ADGM and FSRA
The ADGM is another popular Dubai free zone, regulated by the Financial Services Regulatory Authority (FSRA). It also has public, exempt, and QIF structures. ADGM is renowned for fast approval of QIFs, typically within five business days, and has a transparent, investor-friendly environment.
Qualified investor fund regulations
QIFs are one of the most popular hedge funds in Dubai. They are appropriate for experienced investors and offer greater investment strategy flexibility while maintaining minimum standards in governance, anti-money laundering, and transparency.
Licensing and documentation requirements
In order to operate a hedge fund in Dubai, you must first get a license from the relevant regulator: the Dubai Financial Services Authority (DFSA) if the fund is in the DIFC, or the Financial Services Regulatory Authority (FSRA) if the fund is operating in the ADGM.
Fund managers have to prove that they are qualified and suitable, well-capitalized, and in good governance and compliance procedures. This involves providing
all the documents to verify the structure of the fund, its management, and financial situation.
Documents you may require include:
- Fund Constitution or Partnership Agreement – the legal form and terms of business of the fund.
- Private Placement Memorandum (PPM) – investment policy, risk level, and fee arrangements.
- Subscription Agreements – individual investor and fund.
- Investment Management Agreement – the role and responsibility of the fund manager.
- Passport/ID copies of directors/shareholders.
- Emirates ID and proof of address (tenancy agreement or utility bill).
- Bank and a detailed business plan/financial model.
- Regulator-approved experience and education certificates, if the firm is regulated.
- KYC/AML policies, if the regulator demands them.
Even Qualified Investor Funds (QIFs) that don’t need to comply with such strict reporting, have to maintain proper records and observe strict anti-money laundering (AML) and investor protection rules. Compliance with these has not only benefits in terms of being granted a license but also in developing investor confidence and supporting long-term fund stability.
Free zones for fund setup: DIFC, ADGM, and others
There are several free zones in Dubai where you can register a hedge fund. DIFC and ADGM are by far the most popular choices.
The Dubai International Financial Centre (DIFC) is based in the heart of Dubai, giving you access to a global financial hub with world-class infrastructure and a large network of investors and service providers. It’s a great choice for managers looking to connect with international markets and Dubai’s fast-paced business environment.
Abu Dhabi Global Market (ADGM) offers a more conservative setting but has gained fame for possessing an efficient approval process and full support for new financial services.
Other free zones like DMCC or RAK ICC are typically utilized to create back-office or holding companies but not such specialist fund structures. For most hedge funds, DIFC or ADGM will provide the right mix of credibility and opportunity.
Can foreign investors own 100% of the fund?
Yes, foreigners can own 100% of a hedge fund 100% in many free zones and mainland structures. Hedge funds in other zones may require a local partner or sponsor depending on the business’s activity.
Frequently asked questions
How much money is needed to start a hedge fund?
How much money is needed to start a hedge fund in Dubai depends on various things including the size, scope and expected operational costs. The minimum capital required is usually around AED 1,000,000.
Can I start a hedge fund with my own money?
Yes, you can start a hedge fund with your own money. Doing this will show your investors that you are dedicated to the fund. It is a popular strategy among new hedge fund founders to attract new, quality investors.
What is the minimum size of a hedge fund?
Dubai hedge funds do not have an AUM minimum requirement. Funds with less than AED 375 million (about $100 million) AUM will struggle to bring in institutional investors and attain economies of scale. Regulators are more focused on licensing, governance, and capital requirements rather than AUM.
About Set Hub
Do you want to start a hedge fund in Dubai in 2025 but have no idea where to begin? The Sethub team can help you with the entire set up process. With more than a decade of experience and servicing 25,000 clients, our dedicated team will be by your side, helping you with everything from choosing the correct legal entity to remaining compliant after receiving your license.