Hillhouse Investment Management and CPE, the Chinese firm formerly known as Citic Private Equity, have reportedly held early talks about setting up offices in Abu Dhabi, according to a report by Bloomberg citing sources familiar with the matter.
The city has become a hedge fund hub of late, attracting major firms including Brevan Howard Asset Management and Marshall Wace. A representative from the city’s financial free zone, ADGM, also expects at least two Asian private equity firms to establish a presence there soon.
These developments reportedly highlight a rising interest among Asian investment firms in joining their Western counterparts in the UAE. With its wealthy sovereign wealth funds, tax-free status, and favourable time zone, cities like Abu Dhabi and Dubai are emerging as serious competitors to financial hubs like London and Hong Kong.
And Abu Dhabi’s success isn’t isolated; Dubai is also courting investment firms.
The Dubai Financial Services Authority and the Alternative Investment Management Association recently hosted Chinese wealth and asset management executives, aiming to encourage regional expansion. The hedge fund industry in Dubai has already seen its workforce grow past 1000, bolstered by firms like Millennium Management.
Interest from Chinese companies has surged in 2024, the Dubai International Financial Center (DIFC) reportedly stated, with two major players, Dymon Asia Capital and Asia Research & Capital Management, having opened offices in the emirate.
The UAE’s close ties to China – its largest trading partner since 2020 – also enhance its appeal.
Many Asian firms see the UAE as a gateway to nearby markets such as India. Additionally, the country’s substantial pools of capital make it an attractive destination, with Abu Dhabi housing sovereign wealth funds worth nearly $1.7tn and Dubai’s family offices managing $1.2tn.
Despite these advantages, the emerging hedge fund industry in the UAE faces challenges.
One issue is the limited number of investment opportunities in the Middle East, leading many firms to deploy most of their capital overseas.
Another setback occurred earlier this year when Ray Dalio and Abu Dhabi’s G42 shelved plans for a joint investment venture, a blow for the city given Dalio’s high-profile support for its financial growth.
While the UAE’s appeal grows, much of the hedge fund sector’s infrastructure and workforce remains centred in traditional financial hubs like London and New York.
Citadel CEO Ken Griffin remarked earlier this year that countries with attractive tax regimes may lure senior portfolio managers, but struggle to attract the analysts and associates who support day-to-day operations.
“Having a PM located in a low-tax jurisdiction on Zoom intermittently with a team back in London — that’s not a winning formula,” Griffin noted.
