Abu Dhabi has already drawn the likes of Brevan Howard Asset Management and Marshall Wace as it established itself as a burgeoning hub for hedge funds. Now, a new group of heavyweights are looking to join the mix.
Hillhouse Investment Management and CPE — the Chinese firm formerly known as Citic Private Equity — have held early-stage talks on setting up offices in Abu Dhabi, according to people familiar with the matter. A representative for the city’s financial freezone, ADGM, now expects two private equity firms from Asia to set up a base there shortly.
The moves show there’s a growing number of Asian investment outfits looking to join their Western peers in the United Arab Emirates, where a bevy of deep-pocketed sovereign wealth funds, the country’s tax-free status and favorable time zones have helped cities like Abu Dhabi and Dubai become more serious competitors to financial hubs like London and Hong Kong.
“Abu Dhabi is absolutely nailing it,” Paul Marshall, Marshall Wace’s co-founder, said at the city’s annual financial confab this month, where he exhorted the city’s tax benefits and unveiled his firm’s newest office as one of the headline speakers. “It’s a very attractive place.”
Abu Dhabi isn’t alone in making overtures to investing firms.
Dubai’s financial regulator and the Alternative Investment Management Association recently co-hosted executives from Chinese wealth and asset management firms with the goal of getting some of them to expand to the region. Already, the hedge fund industry’s headcount in the city has topped 1,000 helped by firms like Millennium Management.
“Interest from Chinese companies has surged during 2024,” the Dubai International Financial Center said in a statement. At least two heavyweights have already set up in the emirate in recent months, including Dymon Asia Capital and Alp Ercil’s Asia Research & Capital Management.
The UAE has close ties to China, which has been its top trading partner since 2020. Asian firms looking to enter Dubai or Abu Dhabi are also hoping the cities will serve as a gateway for them to access nearby markets like India.
The country’s twin pools of capital are also an important part of the allure. Abu Dhabi is home to sovereign wealth funds that control close to $1.7 trillion and Dubai, 90 minutes away, houses family offices wielding $1.2 trillion.
But for all of the UAE’s successes, the nascent industry still faces a series of challenges. For one thing, the vast majority of firms’ money is still being deployed overseas given there’s relatively fewer investment opportunities in the Middle East.
And there’s been at least one high-profile instance of plans not working out: Earlier this year, Ray Dalio and Abu Dhabi artificial intelligence firm G42 shelved a planned investment venture. It was seen as a blow for Abu Dhabi because the Bridgewater Associates founder has been the face of the city’s recent success in drawing hedge fund luminaries and called it a “renaissance state” at this month’s event.
Meantime, much of the infrastructure and headcount to support the hedge fund sector is still based in traditional centers like London and New York.
Countries often try to lure top hedge funds by having very attractive tax regimes that might lure a handful of senior portfolio managers but fail to draw in the analysts and the associates who support their day-to-day work in the markets, Citadel Chief Executive Officer Ken Griffin said earlier this year.
“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 said at the time.
Still, there’s now a growing community of hedge fund managers and institutional investors in both emirates — and events have started to mushroom across the country for traders to meet and swap stories.
In Abu Dhabi, for instance, many executives attend an informal gathering every month to socialize. Known as the “Side Hustle Crew,” the 350-person strong club even has sub groups focused on everything from crypto to wine tasting to golf.
Meanwhile, Morgan Stanley is planning to turn its inaugural two-day event in Abu Dhabi into an annual affair for hedge funds and institutional investors after the first confab drew significant interest. Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. are planning their own events next year.
“I sit in a cafe here and see people in charge of half a trillion dollars pass by me in two hours,” said Bhaskar Dasgupta, who moved to Abu Dhabi after stints with banks including HSBC Holdings Plc in London. He now runs his own family office from the emirate.
