The ‘capital of capital’: Abu Dhabi’s pitch to become a global financial centre
Abu Dhabi, the United Arab Emirates’ seat of power, is racing to gain lost ground on neighbouring Dubai and position itself as an international financial hub. Its pitch to companies and investors is fairly simple: money.
The oil-rich emirate styles itself as the “capital of capital”: it has $1.7tn of sovereign wealth holdings and it wants to use them to grow a financial sector to rival Dubai’s busy banking hub, while positioning itself as a safe, low-tax haven for the ultra wealthy.
By focusing on asset managers, private equity and hedge funds, Abu Dhabi is seeking to differentiate itself from Dubai, which boasts a far bigger banking and commercial hub.
Already, its five-star hotels such as the Rosewood and the Four Seasons host the likes of Bridgewater’s Ray Dalio, BlackRock’s Larry Fink and Blackstone’s Steve Schwarzman as they mingle with Gulf royals and networking lawyers — a sign of Abu Dhabi’s progress in persuading international money managers to put down roots there.
The emergence of Abu Dhabi on the regional and global landscape has been absolutely remarkable,” said the head of Middle East at one of the largest asset managers expanding in the region.
Abu Dhabi was slower to diversify its economy away from oil and is playing catch-up to Dubai, which opened its offshore financial centre over two decades ago. After years of stalling attempts, its efforts now appear to be gaining momentum.
“Abu Dhabi Inc as a group of sovereign wealth funds has been one of the most active investors globally in public and private markets, and being closer to that ecosystem makes sense,” the asset manager said. “It’s also a place where talent wants to be.”
Its sheer wealth differentiates Abu Dhabi, home to the vast majority of the UAE’s oil and gas resources, from the Middle East’s busy commercial hub Dubai, whose meagre hydrocarbon reserves pale in comparison.
The much larger economy of Saudi Arabia, meanwhile, is focused on diversifying from its heavy reliance on oil and investing in domestic infrastructure. It too is trying to lure big names in finance and establish itself as a regional hub.
Abu Dhabi has three main sovereign wealth funds, which collectively invest the emirate’s wealth domestically and internationally. The Abu Dhabi Investment Authority, established in 1976, is the traditional, more conservative sovereign wealth fund. Mubadala bears a closer resemblance to a private equity fund, focused on returns. And finally there is ADQ, set up in 2018 as a holding company to help drive the emirate’s economic diversification and more focused on regional investments.
Abu Dhabi’s offshore centre, the ADGM, has been operational since 2015. But it has taken time to gain momentum, and it is only more recently that the emirate has homed in on the asset managers who serve its sovereign wealth funds as key targets.
They have since started to set up shop there in their dozens. At the end of the first quarter of this year, 144 money managers were registered in the ADGM — a 41 per cent jump from the end of 2023.
The days of so-called “suitcase bankers” flying in, picking up a cheque from sovereign wealth funds and flying out again are long gone, said Bhaskar Dasgupta, a former senior executive at ADGM.
Among the newcomers last year were $1.3tn US asset managers PGIM and Nuveen, US private equity groups General Atlantic and Lone Star, and London-headquartered hedge fund Marshall Wace.
A year earlier, Alan Howard’s $34bn hedge fund Brevan Howard Asset Management selected Abu Dhabi as the headquarters for a Middle East expansion and now has more than 100 employees in the emirate, managing more money out of the city than anywhere else in the world. BlackRock intends “to have tens and tens of people” at an office it opened in April in the city, its chief executive said at a conference this year, as it expands across the Middle East.
These funds want to be closer to the local sovereign wealth funds, a crucial source of business for money managers, as well as taking advantage of Abu Dhabi’s low taxes and connectivity with Asia and Africa.
“There’s the same vibe in Abu Dhabi as there was in Hong Kong about 20 years ago,” said one person who works for a hedge fund and relocated from London to Abu Dhabi. “There’s a real sense of being on the ground floor of where the action is.”
ADGM is getting busier. By March this year, ADGM said 2,781 “operational entities” had a presence within the centre, whether that be a full office or a desk; at the end of 2024, there were a third more than the previous year.
Some international incumbents complain that extra office space in ADGM is hard to come by — especially given that first refusal tends to be given to domestic players, many of which have royal connections.
With office towers in ADGM’s original base of Al Maryah Island filling up, the centre has expanded to neighbouring Al Reem.
Asset managers expecting some kind of quid pro quo from opening an Abu Dhabi office are likely to find themselves disappointed.
The early fortunes of Brevan Howard show that physical proximity to the country’s sovereign wealth funds alone does not guarantee immediate fundraising success. In the two years after it opened an Abu Dhabi office in February 2023, it did not receive significant allocations from local investors.
“When money was cheap and [global] interest rates were low, sovereign wealth funds were spraying money all over the place,” Dasgupta said. “Life is different now with high inflation, high interest rates and high volatility.”
Many younger traders still prefer the buzz of Dubai. Still, Abu Dhabi’s relative tranquility appeals to the ultra-wealthy.
Leon Black, founder of private capital firm Apollo, and Dalio both have family offices in ADGM. No tax on income or capital gains in the UAE, as in most Gulf states, makes it appealing for high earners. Alongside Italy and Switzerland, the country has emerged as one of the main beneficiaries of an exodus from the UK, driven by the abolition of the non-dom regime.
The autocratic emirate has also sought to improve regulatory environment, according to Muneer Khan, Middle East regional head at law firm Simmons & Simmons.
“The key difference with other leading financial services regulators is not so much the rules, but the regulators’ approach in both Dubai and Abu Dhabi,” said Khan. “They’re not sitting in their ivory towers, they’re accessible, engaged, and ensuring that competitiveness is a key part of their mandate.”
ADGM’s regulator has also established cryptocurrency rules, allowing hedge funds to trade the volatile digital assets, as well as traditional ones, under a single regulator. The financial centre also uses English law, another significant attraction, and has established the world’s first fully digital court.
Privately, however, businesspeople say that the autocratic emirate is still opaque, with the local economy dominated by Abu Dhabi’s state entities and companies affiliated to powerful royal family members and less economic data available than elsewhere.
“Dubai is, from an international perspective, transparent compared to Abu Dhabi,” said James Swanston of Capital Economics.
But officials believe it is an opportune moment for Abu Dhabi to press its advantages. The wealthy Gulf region “is now coming at boardroom level conversation as one of the key areas where you’re going to do business in,” said Arvind Ramamurthy, ADGM’s market development chief. At “ADGM we’ve been securing — I would like to think — a decent part of that head space.”
Some fund managers see Abu Dhabi as a promising regional base. Still, many are hedging their bets by opening multiple locations in the region, including in Riyadh and Dubai. Ramamurthy said there was no “zero-sum game” competition between cities. As regional clusters evolve, however, it is increasingly the hedge funds and asset managers that find themselves in Abu Dhabi, with banks still more at home in Dubai.
Change is palpable. One banker and long-term Abu Dhabi resident said they had “never seen momentum like it” in the city. “Five years ago you would have had to beg to bring people here. Now it’s seen as a good place to be.”
