Executive Summary
On 7 July, the Dubai Financial Services Authority (DFSA) has published Consultation Paper No. 173, setting out proposals to enhance its Collective Investment Fund framework. The paper covers a wide range of proposed changes relevant to fund managers, fund administrators, persons managing assets and custody providers.
Importantly, the paper proposes the introduction of a long-term investment Fund (LTIF) regime for retail investors to access illiquid, real-economy asset classes.
As of today, LTIFs can be established in the DIFC, as either Exempt Funds or QIFs. The DFSA is considering the safeguards that would need to be built into the regime, taking inspiration from established frameworks such as the EU's ELTIF and UK's LTAF. The DFSA consider that the key considerations around the safeguards needed for offering LTIFs to retail investors are:
- Access to LTIFs: LTIF assets tend to be illiquid and of a long-term nature, they are unlikely to be suitable for all types of retail investors. DFSA is considering whether LTIFs would be suitable for mass retail or whether they should only be made available to a restricted segment of the retail market. In other regulatory regimes, a suitability assessment is required.
- Modus operandi for redemptions: A notable feature of LTIFs should be the ability to redeem units despite the long-term illiquid nature of the assets. To enable the granting of redemptions, regulators can mandate that a certain portion of the LTIF must be comprised of liquid assets (e.g. cash or easier-to-sell investments to help cover redemptions), as well as prescriptive rules around the frequency of redemptions, the minimum notice period for payment of redemptions and the minimum amount of the LTIF’s Net Asset Value that should be offered for redemption purposes.
- Investor awareness: Given the long-term illiquid nature of the assets, retail investor should be made aware of the features and risks of LTIFs via a key information document.
The DFSA will receive comments until 7 September 2026, after which it will consider which changes to the proposed framework are necessary and amend the proposed draft legislation as appropriate.
Practical implications
Once these rules are approved by the DFSA, Dubai will join the EU, UK, Singapore and Ontario in the development of specific fund vehicles for professional and retail to access long-term, real economy assets.
A key consideration for these DFSA rules will be the requirements around master-feeder structures and the ability for Dubai LTIFs to invest in third-country long-term assets and funds.