Finance

Dubai and Abu Dhabi Race for Wealth Management Dominance

Discover how Abu Dhabi is emerging as a key player in wealth management, challenging Dubai's long-standing dominance. Explore the factors driving this shift, including economic diversification, sovereign wealth funds, and regulatory advantages in the UAE.

Emerging Competition in Wealth Management Between Dubai and Abu Dhabi

DUBAI (Reuters) - Abu Dhabi is emerging from Dubai's shadow as it attracts its own share of asset managers and billionaires' wealth, helping cement the United Arab Emirates' role as an alternative to global financial hubs in wealth management.

Lacking rich oil reserves, Dubai has built up over the past two decades its position as the region's No. 1 financial center, with its allure of low taxes, the application of English common law, and exposure to the region's brisk economic growth.

Globally, Dubai ranks 16th in the latest tally from the Global Financial Centres Index, while Abu Dhabi is 35th, with both being number one and two, respectively, for the Middle East and Africa region in wealth management.

Abu Dhabi's Economic Diversification and Wealth Management Growth

However, over the past few years, Abu Dhabi, which holds 90% of the UAE's oil reserves, has accelerated efforts to diversify its economy, leaning on its vast wealth and sovereign funds that together manage almost $2 trillion to boost non-oil growth and wealth management.

The emergence of companies in a range of new sectors and potential for business created by Abu Dhabi's investments have not gone unnoticed in the international financial community focused on wealth management.

"It's completely changed in the past year; there's been an influx of money managers, hedge funds, and alternatives coming to conferences to raise funds here," said Ryan Lemand, co-founder and CEO of Abu Dhabi-based fund management and investment advisory firm, Neovision Wealth Management.

Asset Managers Setting Up in Dubai and Abu Dhabi for Wealth Management Opportunities

Some have already set up shop in Dubai or, increasingly, Abu Dhabi to gain an edge over those traveling from London, New York, or Hong Kong to drum up new business in wealth management.

Lemand was speaking ahead of this week's Alternative Investment Management (AIM) Summit in Dubai, which drew hundreds of institutions from across the globe, including names like Brevan Howard and JPMorgan Asset Management.

While statistics for both centers are not entirely comparable, they show Dubai remains well ahead. The Dubai International Financial Centre currently has over 420 wealth and asset management firms operating in the city, its head of wealth and asset management said at the AIM conference. There were no recent figures for Abu Dhabi, and data from the end of June showed 112 fund firms registered there.

New Arrivals Boosting Abu Dhabi's Wealth Management Scene

Abu Dhabi has clear momentum, according to eight attendees of the AIM Summit. They cited rising company registrations, the draw of sovereign wealth funds, and the ease of obtaining a license to operate compared to other financial centers, now at par with Dubai's, all contributing to its wealth management appeal. They spoke on background because the subject matter was sensitive to their business.

Billionaire Ray Dalio, founder of hedge fund Bridgewater Associates, and other hedge funds including Brevan Howard are among those who now have a presence in Abu Dhabi. Asset managers PGIM, the investment management arm of U.S. insurer Prudential Financial, and Nuveen are also new additions to the wealth management landscape.

General Atlantic, a New York-based private equity firm with $83 billion under management, is also set to join after it received preliminary approval. A further dozen or so asset managers and hedge funds have been approved in principle, according to data from Abu Dhabi Global Market, the city's financial center.

Sovereign Wealth Funds as a Draw for Wealth Management Firms

Abu Dhabi is the world's richest city when measured by the assets held by sovereign wealth funds, sitting on $1.7 trillion, with such funds managing around $500 billion in Dubai, according to a Global SWF report released earlier this month.

An employee at one investment firm, who declined to be named, said the bigger presence of sovereign wealth funds served as an incentive to set up in Abu Dhabi for wealth management purposes.

Regulatory Environment Boosting Wealth Management in UAE

For both centers, the ease and clarity of regulations has been a major draw for financial investors focused on wealth management.

"The regulatory environment is extremely favorable," said Brandon Robinson, deputy head of private markets at JPMorgan Asset Management.

UAE's ambition to become a global center for the crypto industry, with the regulator for the emerging sector operating in Dubai since 2022, is also wooing new players. The United States lacks an overarching national framework, while European Union rules are coming into force this year, placing the UAE ahead of global financial hubs in wealth management.

Brevan Howard does a significant amount of its crypto trading from the UAE, Ryan Taylor, group head of compliance at the hedge fund, told the AIM conference.

Tourism and Property Investment: Dubai vs. Abu Dhabi in Wealth Management

Both cities also work hard to boost tourism and property investment, and for some, Dubai, with a longer record of drawing international finance and vibrant entertainment, was still ahead in wealth management. Boasting the world's tallest skyscraper, Dubai had a clear edge in the number of nightclubs and high-end restaurants, and as one hedge fund professional described it, the city's financial district was "buzzing."

Conclusion

The race between Dubai and Abu Dhabi to attract wealth managers signifies a significant shift in the UAE's financial landscape. With Abu Dhabi gaining ground through economic diversification, robust sovereign wealth funds, and favorable regulations, the competition is set to intensify, reshaping the region's role as a global financial hub for wealth management.