ADGM Investment Funds Framework: Key Regulatory Changes

The FSRA has enacted amendments to its funds framework (further to the Consultation Paper No. 12 of 2025), updating the Fund Rulebook (FUNDS), General Rulebook (GEN), Conduct of Business Rulebook (COBS), and Glossary (GLO). The changes most relevant to fund managers operating in or from ADGM are as follows:

1.    New Fund Manager Sub-Categories

• Sub-Threshold Fund Manager (STFM) – a new authorised category for managers whose permission is limited to: (i) managing closed-ended, non-retail collective investment funds with aggregate committed capital not exceeding USD 200 million; and (ii) advising on investments or arranging deals, but only to facilitate co-investments in those funds.
• Institutional Fund Manager (IFM) / Institutional Fund Asset Manager (IFAM) – an IFM manages only Institutional Funds, being QIFs or Foreign Funds with a minimum subscription of USD 5 million that accept no Natural Person investors. An IFAM is a Group member of the Fund Manager that carries on Managing Assets only in respect of Institutional Funds. A Master Fund qualifies as Institutional only if all its Feeder Funds are also Institutional.
• Venture Capital Fund Manager (VCFM) – revised – the previous USD 100 million total subscription cap has been deleted. VCFMs are now aligned with STFMs: aggregate committed capital across all managed funds must not exceed USD 200 million. VCFMs may also carry on advising/arranging activities restricted to co-investments in assets in which their VC funds have invested or will invest.

2.    Shared Exemptions

STFMs, IFMs, IFAMs and VCFMs all benefit from the following carve-outs:

• No Finance Officer required (GEN 5.5.1(3)).
• Risk management framework (GEN 3.3.13), compliance function (GEN 3.3.14) and internal audit function (GEN 3.3.15) are all disapplied.

These represent meaningful reductions in governance overhead for lighter-touch fund managers.

Prospectus note: Fund managers in these categories must disclose their regulatory status and any restrictions on their Financial Services Permission in their fund prospectus.

3.    Employee Investment Vehicles – New Framework

An Employee Investment Vehicle (EIV) – a body corporate or partnership established to enable investment by employees or directors in an Exempt Fund or QIF – is now excluded from the definition of a Fund, and minimum subscription thresholds are disapplied for EIV subscriptions.

Six conditions must be met for exempt status: all EIV investors must be employees or directors directly involved in executing the fund’s investment strategy; the fund manager must assess their knowledge and understanding; provide written disclosure and a copy of the prospectus; obtain written acknowledgment of risks; and participation must not be a condition of employment.

EIVs are classified as deemed Professional Clients under COBS, but only in respect of the underlying fund.

4.     Foreign Fund Managers – Tighter Regime

FFMs may only manage a Domestic Fund that is a QIF and is closed-ended.  The FFM must unconditionally submit to ADGM laws and the jurisdiction of the ADGM Courts in respect of its domestic fund activities. The previous alternatives – submission to Zone 1 or Recognised Jurisdiction laws, or laws reasonably equivalent to ADGM – have been deleted.

Before commencing management, an FFM must appoint:

• An FSRA-licensed Fund Administrator or Trustee;
• An Eligible Custodian (unless both impractical and disproportionate);
• A UAE-resident Natural Person on the Board of the Fund (Investment Company) or general partner (Investment Partnership);
• An ADGM-licensed corporate service provider as the Fund’s agent for receipt of process.

An FFM is prohibited from engaging any third party to provide investment advice or manage Fund Property – host fund manager structures are not permitted.

Action Points

If you operate within – or are considering – the ADGM funds regime, you should review whether your current structure, permissions, and appointments align with these changes. Please contact our Investment Funds team for more information:

• Divya Abrol Gambhir | Partner | D.Abrol@tamimi.com
• Mark Brown | Partner | M.Brown@tamimi.com
• Ashish Banga | Of Counsel | A.Banga@tamimi.com
• Ilias Papanikolaou | Associate | I.Papanikolaou@tamimi.com